WAEC Economics 2010 Theory — Question 3

Model answer

The law of diminishing marginal utility states that marginal utility (that is, additional satisfaction) diminishes as more units of a commodity are consumed. Consumers assign a price to the marginal utility they derive from each unit consumed. Since lower satisfaction is expected from each extra unit than the one that precedes it, it means the value of the commodity falls; hence, he offers a lower price for that unit. Consumers buy more units of a commodity only if price falls, giving the demand curve its downward slope.