Multiple choice

The second glass of lemonade gives lesser satisfaction to a thirsty boy. This is a clear case of

  1. law of demand

  2. law of diminishing returns

  3. law of diminishing marginal utility

  4. law of supply

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

As a person consumes more units of a good, the additional satisfaction from each extra unit decreases. The first glass gives maximum satisfaction to a thirsty person, but each subsequent glass provides less utility than the previous one. This is a fundamental principle of consumer behavior explaining why demand curves slope downward.