Final answer:
Consumers use utility to determine what they are willing to pay for a product. The law of diminishing marginal utility explains why consumers are willing to pay more for the first few units of a product that provide higher levels of utility.
Step-by-step explanation:
Consumers use utility to determine what they are willing to pay for a product. Utility refers to the satisfaction or usefulness that a product provides to a consumer. When making a purchasing decision, consumers typically weigh the utility they expect to receive from the product against its price. The law of diminishing marginal utility states that as a person consumes more of a good, the additional utility derived from each additional unit of the good decreases. This means that consumers are generally willing to pay more for the first few units of a product that provide them with higher levels of utility, but they become less willing to pay as much for additional units that provide diminishing utility.