The negative relationship between the quantity demanded of a commodity and its price can be explained by the principle of
A) increasing total utility.
B) contingent valuation.
C) indifference analysis.
D) diminishing marginal utility.

Question

Quizplus · Accepted Answer

The principle of diminishing marginal utility states that as the quantity of a good consumed increases, the marginal utility (satisfaction) derived from each additional unit decreases. Therefore, as the price of a good increases, consumers will demand less of it in order to maintain their desired level of satisfaction. This results in a negative relationship between quantity demanded and price.

The Negative Relationship Between the Quantity Demanded of a Commodity