4/7/2023 0 Comments Price consumption curveThis is the argument we have to reconsider. A fall in price therefore increases the amount demanded. But, by the law of diminishing marginal utility, this implies an increase in the amount demanded. If the price falls, the marginal utility must be reduced too. He assumes that the marginal utility of money is constant.* Therefore, the ratio between the marginal utility of a commodity and its price is a constant ratio. The particular way in which Marshall carries out that deduction is worth noting. This stage of our investigation corresponds to the stage in Marshall’s theory where he deduces the downward slope of the demand curve from the law of diminishing marginal utility. Discussion of equilibrium conditions is always a means to an end we seek information about the conditions governing quantities bought at given prices in order that we may use them to discover how the quantities bought will be changed when prices change. We have now, from the conditions of equilibrium and the basic assumption of regularity, set out in the preceding chapter, to deduce laws of market conduct -to find out what can be said about the way the consumer will react when prices change.
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