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

question 64

Multiple Choice

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

• A)as P_X falls,the ratio MU_X/P_X becomes smaller,causing the consumer to purchase more of good X.
• B)as P_X rises,the consumer increases purchases of X such that MU_X/P_X 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 P_X falls,the consumer increases purchases of X until MU_X/P_X is equal to MU/P for all other products.

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Definitions:

Managerial Decisions

Actions taken by management using available information that influence the strategic direction and operations of a business.

Market-Wide Interest Rates

The prevailing rates of interest across various financial markets, influencing the cost of borrowing and lending.

Cost of Equity

The return that investors expect for their investment in a company, representing the compensation for the risk of investing in the equity of the company.

Discretionary Accounting

Involves the use of judgment by management to choose among acceptable accounting techniques or adjusting estimates that impact financial statements.