The correct answer is: C. Law of diminishing marginal utility.
Gossen’s first law, also known as the law of diminishing marginal utility, states that as a consumer acquires more of a good, the marginal utility (additional satisfaction) derived from each additional unit of that good decreases.
In other words, the first slice of pizza you eat might be delicious, but the second slice might not be as good, and the third slice might not be as good as that. This is because your desire for pizza decreases as you consume more of it.
The law of diminishing marginal utility is a fundamental concept in economics, and it has important implications for how consumers make decisions about what to buy. For example, if the law of diminishing marginal utility is true, then consumers will only buy a good up to the point where the marginal utility of the good is equal to the price of the good.
The law of diminishing marginal utility can also be applied to other areas of life, such as work and leisure. For example, if you work for a few hours, you might enjoy the work and find it satisfying. However, if you work for many hours, you might start to find the work less enjoyable and more tiring. This is because the marginal utility of work decreases as you work more hours.
The law of diminishing marginal utility is a powerful tool that can help us understand how people make decisions. It is a fundamental concept in economics, and it has important implications for how we live our lives.
The other options are incorrect because they do not describe Gossen’s first law.
- Option A, the law of substitution, states that consumers will substitute one good for another if the relative prices of the goods change.
- Option B, the law of equimarginal utility, states that consumers will maximize their utility by allocating their income in such a way that the marginal utility of each good is equal to the price of the good.
- Option D, none of the above, is incorrect because Gossen’s first law is a well-established economic principle.