Concept:The law of diminishing marginal utility explains how consumers decide to spend their limited income on different goods.
Explanation:When a consumer buys more units of a good, each additional unit gives less satisfaction than the previous one.
This extra satisfaction is called marginal utility.
A rational consumer compares the marginal utility gained from each good with the price of that good.
The consumer keeps buying a good until the satisfaction from the last unit is no longer worth its price.
This guides the consumer in distributing money among various wants to get the greatest total satisfaction.
Therefore, consumers allocate their resources based on the law of diminishing marginal utility.
Answer:A. Law of diminishing marginal utility