b) Law of diminishing marginal utility

c) the concept of diminishing marginal utility and how this influences the shape of the demand curve

marginal utility = the additional utility gained from the consumption of an additional unit of a good or service

total utility = the sum of all marginal utilities

the law of diminishing marginal utility = as additional units are consumed → utility gained from the next unit < utility gained from the previous unit

the law of diminishing marginal utility shows why demand curves slope downwards

• as additional units are purchased → price increases + marginal utility decreases

• consumers are less willing and able to purchase additional units

• so a lower price increases the quantity demanded