Question

The Marginal Utility Curve slopes downward from left to right indicating ________.

• A. a direct relationship between marginal utility and the stock of commodity
• B. a constant relationship between utility and the stock of commodity
• C. a proportionate relationship between marginal utility and th stock of commodity
• D. an inverse relationship between marginal utility and the stock of commodity

Answer 1

The correct option is D an inverse relationship between marginal utility and the stock of commodity

The marginal utility curve is convex in nature and this follows directly from the the assumption of diminishing marginal rate of substitution. This implies that lesser is amount of the good consumed the consumer, the lesser willing it is to give up a unit of that good to obtain an additional unit of the other good. The opportunity cost of obtaining each extra unit is increasing, as the slope gets flatter.