The correct answer is: D. law of diminishing marginal utility
The law of diminishing marginal utility states that as a consumer acquires more of a good, the additional satisfaction or utility gained from each additional unit of that good decreases.
The law of diminishing marginal utility is one of the fundamental concepts in economics. It is used to explain why consumers will not continue to consume a good indefinitely, even if the good is free.
The law of diminishing marginal utility can be illustrated with a simple example. Suppose you are very thirsty and you drink a glass of water. The first sip of water will give you a lot of satisfaction. The second sip will give you less satisfaction, and so on. After a while, you will reach a point where you are no longer satisfied by drinking more water.
The law of diminishing marginal utility applies to all goods and services. It is not just limited to goods that are consumed in physical quantities, such as food and water. It also applies to goods that are consumed in intangible quantities, such as entertainment and leisure.
The law of diminishing marginal utility is a powerful tool for understanding consumer behavior. It can be used to explain why consumers make the choices they do, and it can be used to predict how consumers will respond to changes in prices and incomes.
The other options are incorrect because they do not refer to the law of diminishing marginal utility.
- Option A, law of equi-marginal utility, is a principle in economics that states that a consumer will maximize utility by allocating their income in such a way that the marginal utility of each good consumed is equal to the marginal utility of every other good consumed.
- Option B, law of equi-product, is a principle in economics that states that a firm will maximize output by producing at a point where the marginal product of each factor of production is equal to the price of that factor.
- Option C, theory of indifference curve, is a theory in economics that states that consumers will choose a combination of goods that gives them the highest level of satisfaction, or utility.
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