b) the 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

the law of diminishing marginal utility = as additional units are consumed, the utility gained from the next unit is lower than the utility gained from the previous unit

• marginal utility continuously decreases

• total utility continuously increases

  • total utility = the sum of all marginal utilities

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

• when a unit is purchased, the consumer is less willing to purchase additional units at a high price

• a lower price therefore increase the quantity demanded