Problem 6 Would you expect total utility t... [FREE SOLUTION]

Chapter 6: Problem 6

Would you expect total utility to rise or fall with additional consumption of a good? Why?

Short Answer

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In summary, total utility is expected to rise with additional consumption of a good but at a decreasing rate, due to the law of diminishing marginal utility. As long as the marginal utility is positive, total utility will continue to increase, but the increase will become smaller and smaller as more units of the good are consumed.

Step by step solution

1. Understanding Total Utility and Marginal Utility

Total utility is the total satisfaction a consumer gets from consuming a certain quantity of a good. Marginal utility is the additional satisfaction obtained from consuming one more unit of a good. As more units of the good are consumed, the marginal utility tends to decrease, illustrating the law of diminishing marginal utility.

2. Examining the Law of Diminishing Marginal Utility

The law of diminishing marginal utility states that as more of a good is consumed, the additional satisfaction (marginal utility) gained from consuming each additional unit decreases. This is because the more of a good a person has, the less valuable the next additional unit becomes, as they have already satisfied most of their needs for that particular good.

3. Measuring Total Utility with Additional Consumption of a Good

To measure the impact of additional consumption on total utility, we can calculate the total utility at various quantities of the good. Total utility is the sum of the marginal utilities of each additional unit consumed. As long as the marginal utility is positive, total utility will continue to rise.

4. Determining Whether Total Utility Rises or Falls with Additional Consumption

Based on the law of diminishing marginal utility, we can expect total utility to increase with additional consumption of a good, but at a decreasing rate. Additional consumption of the good will lead to an increase in total utility since the marginal utility of the good, although diminishing, is still positive. However, as the marginal utility continues to decrease, the increase in total utility will become smaller and smaller, eventually approaching a maximum point. In conclusion, we can expect total utility to rise with additional consumption of a good, but at a decreasing rate due to the law of diminishing marginal utility.