The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3

-As the price of a good increases:
A)that good will yield less satisfaction per dollar than before.
B)consumers will have more real income to spend on other goods.
C)the quantity demanded of that good will also increase.
D)the utility-maximizing quantity of that good willl not change.
E)consumers will buy the good and substitute away from other goods.

Question

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3
 
-As the price of a good increases:
A)that good will yield less satisfaction per dollar than before. 
B)consumers will have more real income to spend on other goods. 
C)the quantity demanded of that good will also increase. 
D)the utility-maximizing quantity of that good willl not change. 
E)consumers will buy the good and substitute away from other goods.

Quizplus · Accepted Answer

This is the law of diminishing marginal utility, which states that as the price of a good increases, each additional unit of that good will yield less satisfaction (utility) per dollar spent than the previous unit consumed. This means that the consumer will be less willing to spend their money on that good and may look for substitutes, which leads to a decrease in the quantity demanded of that good.

The Below Table Shows the Average Utility (In Utils) Obtained