Explain how utility analysis can be used to derive a downward sloping demand curve
What will be an ideal response?
Given the law of diminishing marginal utility and the equal marginal utilities per dollar rule, there is a negative relationship between price and quantity demanded of a good. A fall in price means people want to buy more of the good in order to get the marginal utility per dollar of this good in line with the other goods. The marginal utility must fall to get the marginal utility per dollar of this good in line with the other goods, and the law of diminishing marginal utility implies that more of the good must be purchased to get marginal utility to decrease.
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The demand curve for loanable funds slopes down because
A) at lower bond prices more loanable funds will be supplied. B) lower interest rates reduce the inflation rate. C) an increase in the interest rate makes borrowers more willing and able to demand more funds. D) a decrease in the interest rate makes borrowers more willing and able to demand more funds.
Government regulation of a natural monopoly causes its average cost curve to shift downward.
Answer the following statement true (T) or false (F)
Individuals who specialize in activities that lower transaction costs are
A. producers. B. middlemen. C. consumers. D. bureaucrats.
In comparing accounting profit with economic profit, we generally find that
A) accounting profit is less than economic profit. B) economic profit and accounting profit are the same in the short run. C) accounting profit is greater than economic profit. D) economic profit exceeds accounting profit by the amount of opportunity costs.