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

question 79

Multiple Choice

Marginal utility analysis predicts a downward-sloping demand curve for good X because

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

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Definitions:

Shortage

A situation in which the demand for a good or service exceeds its supply in a market.

Surplus

is an economic situation in which the quantity of a good supplied exceeds the quantity demanded at the current price, often leading to a decrease in prices.

Supply Determined

Refers to market situations where the quantity of products available in the market is primarily dictated by the supply side factors such as production capacity and inventory levels rather than by consumer demand.

Price Rationing

The process of distributing goods and services among consumers by setting a price level that balances demand with supply.