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WAEC Economics 2006 Question 15

Question 15

Theory of Consumer Behaviour

In the analysis of utility theory, the basis of demand is

  1. A.marginal utility
  2. B.average utility
  3. C.fixed utility
  4. D.diminishing utility
Show the answer and explanation

Answer: A (marginal utility)

Explanation

A consumer buys more of a good only while its marginal utility justifies the price, so marginal utility underlies demand.