Q. 9 聽If people do not have a comple... [FREE SOLUTION]

Chapter 6: Q. 9 (page 152)

If people do not have a complete mental picture of total utility for every level of consumption, how can they find their utility-maximizing consumption choice?

Short Answer

Expert verified

The utility-maximizing consumption option can be obtained by estimating the marginal utility for each level of consumption if consumers do not have any conceptual picture of utility.

Step by step solution

Step 1:Definition

Total Utility and Marginal Utility:

In economics, total utility and marginal utility are concepts under utility that assist determine a consumer's level of satisfaction. The total utility refers to the whole amount of pleasure derived by a customer from the consumption of a specific amount of products. Marginal utility, on the other hand, refers to the additional utility gained by a consumer from the consumption of one additional unit of the good.

Step 2;Explanation

One can pick a random beginning position and analyze the marginal utility gains and costs of going to surrounding points before deciding on the best option. Consumers that are rational compare value for money. If one good is more valuable than another, people will purchase more of the former and less of the latter. People make decisions on the margins, not on the basis of totals.

Conclusion

Therefore, one can pick a random beginning position and analyze the marginal utility gains and costs of going to surrounding points before deciding on the best option.