In marginal analysis, diminishing marginal utility helps explain why a consumer's demand curve for a good typically slopes downward. Which statement best captures this idea?

• A. As a consumer consumes more of a good, the marginal utility from each extra unit increases, so the consumer is willing to pay a higher price for additional units.
• B. Diminishing marginal utility means total utility falls as consumption rises, so consumers buy less at any price.
• C. Diminishing marginal utility implies the marginal cost of producing the good rises, which forces consumers to reduce quantity demanded.
• D. As a consumer consumes more of a good, the additional (marginal) utility from each extra unit decreases, so the consumer is willing to pay a lower price for additional units.

Answer: (D)

Verified step by step guidance

1. Understand the concept of marginal utility: Marginal utility is the additional satisfaction or benefit a consumer receives from consuming one more unit of a good or service.
2. Recognize the principle of diminishing marginal utility: As a consumer consumes more units of a good, the marginal utility derived from each additional unit tends to decrease. This means each extra unit provides less added satisfaction than the previous one.
3. Connect diminishing marginal utility to willingness to pay: Since each additional unit provides less utility, the consumer values it less and is therefore willing to pay a lower price for each subsequent unit.
4. Relate this to the demand curve: Because consumers are willing to pay less for additional units, the quantity demanded increases only if the price decreases, which results in a downward-sloping demand curve.
5. Summarize the key idea: The downward slope of the demand curve is explained by diminishing marginal utility, which causes consumers to reduce their willingness to pay as they consume more units of a good.