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3 marksTheory of Consumer Demand

CAPE Economics Unit 1 · 2010 · Paper 2 · Question 1(a)(iii)

SECTION I Answer ONE question from this section. Draw all diagrams neatly and carefully and clearly label all axes and curves.

Using suitable examples, explain the law of diminishing marginal utility.

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Other parts of this question

  1. 1(a)(i)Using suitable examples, explain the concept of total utility.[3 marks]
  2. 1(a)(ii)Using suitable examples, explain the concept of marginal utility.[3 marks]
  3. 1(b)(i)Copy and complete Table 1.[5 marks]
  4. 1(b)(ii)Using information from Table 1, draw the consumer's demand curve for bread.[5 marks]
  5. 1(b)(iii)Determine how many loaves of bread and how many bags of buns the consumer can buy with a budget of $5 to maximize satisfaction, and explain your answer.[4 marks]
  6. 1(b)(iv)If the price of a loaf of bread rises to $2, identify what combination of bread and buns will maximize the consumer's utility.[2 marks]

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