Demand curves slope downward because, other things held equal, A. a decrease in a product's price lowers MU. B. a decrease in a product's price raises MU per dollar and makes consumers wish to purchase more units. C. an increase in a product's price raises MU per dollar and makes consumers wish to purchase more units. D. an increase in a product's price lowers MU.

Question

Meghan Preston

Business

11 March, 14:19

Demand curves slope downward because, other things held equal, A. a decrease in a product's price lowers MU. B. a decrease in a product's price raises MU per dollar and makes consumers wish to purchase more units. C. an increase in a product's price raises MU per dollar and makes consumers wish to purchase more units. D. an increase in a product's price lowers MU.

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Answers (1)

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Cash Bright · Answer 1

Answer: Option (B) a decrease in a product's price raises MU per dollar and makes consumers wish to purchase more units is correct.

Explanation:

If the price of a commodity decreases, as a result purchasing power of a consumer increases as well as raises the MU per dollar. This is one of the reasons why the AD curve slopes downward.

Suppose there is a fall in the price of a commodity, this will increase the demand for that commodity as well as the purchasing power of the consumer.

Because with a lower price of the commodity, individuals can buy more quantity of goods with the same level of income as well as its marginal utility from an extra unit also increases.