Marginal utility analysis predicts a downward- sloping demand curve for good X because
A) utility- maximizing consumers equate marginal utility received for each product consumed.
B) all demand curves are downward sloping, regardless of the behaviour of consumers.
C) as PX falls, the ratio MUX/PX becomes smaller, causing the consumer to purchase more of good X.
D) as PX falls, the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products.
E) as PX rises, the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products.

Question

Quizplus · Accepted Answer

As the price of good X (PX) falls, consumers will purchase more of X until the marginal utility per dollar spent on X (MUX/PX) equals the marginal utility per dollar spent on other goods, maintaining utility maximization.

Marginal Utility Analysis Predicts a Downward- Sloping Demand Curve for Good