LS14 - Diminishing Marginal Utility

Question 1

Income effect

Answer 1

Assuming fixed level of income, income effect means that as price falls amount consumers can afford rises so demand increases

Question 2

Marginal utility

Answer 2

Satisfaction or utility obtained from consuming one extra unit of a good or service

Question 3

Diminishing marginal utility

Answer 3

As successive units of a good are consumed, marginal utility gained from each extra unit will fall