If a product has a low marginal utility, then
A consumer is willing to pay a lower price for it. |
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The demand curve will be downward-sloping. |
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Consumers will not purchase any more of the good. |
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Consumers will also have a low total utility. |
A consumer strike his equilibrium where price of the good is equal to the marginal utility derived from that good.
Thus if a good is giving a low marginal utility then a rational consumer would pay less to purchase that good in order to be in equilibrium.
Thus when we take another extra unit of good its marginal utility derived from that additional unit decline and thua consumer would like to pay less price for that good. Thua we have downward sloping demand cueve.
However total utility will keep on increase but at a decreasing rate untill marginal utility become negative.
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