Question

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?

A) the rationing function of prices
B) diminishing marginal utility
C) the substitution effect
D) the income effect

Answer 1

B) diminishing marginal utility

Step-by-step explanation:

Based on the information provided within the question it can be said that the statement is most consistent with the explanation of diminishing marginal utility. This is because this law states that the marginal utility of a good/service falls as supply increases. Thus encouraging buyers to purchase more until supply falls and prices increase.