How does the law of diminishing marginal utility affect quantity demanded?

1 Answer
Nov 27, 2015

Law of Diminishing Marginal Utility forms the basis of Law of Demand.


According to Law of Demand the consumer is in equilibrium when he equates MU with price.

When the price of the product falls. His equilibrium is disturbed. MU is greater than price. He has to reduce the MU to be in equilibrium. This is possible only by consuming more.

Hence the consumer buys more when price falls.

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