Question

The diminishing marginal utility effect states that as more of an item is consumed and the amount of additional satisfaction decreases, the seller must ________ price to induce the consumer to buy more.

Answer 1

Answer: decrease

Explanation: Marginal utility could be explained as the extra satisfaction derived from the consumption of one extra unit of an item. However, as consumption increases, the extra satisfaction (marginal utility) begins to decline. At this point, the demand for such product or item will tend to fall or drop due to the decline in satisfaction. When this happens, reduces the price of such item becomes paramount in other to fight the decline in demand of the product and induce consumers to buy more.