The consumer demand curve for a product is downsloping because marginal utility is constant when price declines.
True
False
The correct answer and explanation is :
Correct Answer: False
Explanation (Approx. 300 Words):
The consumer demand curve for a product is downsloping, but not because marginal utility is constant when the price declines. In fact, the correct economic reasoning is that the demand curve slopes downward because marginal utility diminishes as consumption increases, and consumers respond to price changes in a way that reflects this principle.
Marginal Utility refers to the additional satisfaction a consumer receives from consuming one more unit of a good. According to the Law of Diminishing Marginal Utility, as a person consumes more units of a product, the additional (marginal) utility derived from each successive unit tends to decrease. This concept is central to understanding consumer behavior.
When the price of a product falls, the opportunity cost of buying that product decreases, making it relatively more attractive compared to other goods. As a result, consumers are willing to purchase more of the product, even though the marginal utility of additional units may be lower. This behavior is what creates a negatively sloped (downward-sloping) demand curve: lower prices lead to higher quantities demanded.
If marginal utility were constant when price declines, consumers would gain the same satisfaction from each unit regardless of how many they consumed. In such a hypothetical case, the demand curve might be flat (perfectly elastic) or take some other shape, but it would not necessarily be downward sloping in the traditional sense.
Thus, the correct explanation for the downward slope of the demand curve lies in the interaction between diminishing marginal utility and the consumer’s effort to maximize total utility within their budget constraints.
In summary, the demand curve is downsloping because marginal utility diminishes, not because it stays constant. This reflects rational consumer choice in response to changing prices.