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Chapter 6: Q.5 (page 151)

Who determines how much utility an individual will receive from consuming a good?

Short Answer

Expert verified

Individuals are the only ones who can assess their own utility. In general, better total utility is associated with more consumption of a good.

Step by step solution

01

Definition:

Marginal Utility

The additional amount of value you acquire for consuming an incremental unit of some good is known as marginal utility. Because value is subjective, utility is also subjective.

02

Explanation:

The number of units reported in customer feedback surveys is averaged by the producers to determine utility. One's own preferences determine utility. The supply and demand curves determine utility. The additional utility gained from each unit of higher consumption, on the other hand, tends to reduce in a diminishing marginal utility pattern.

03

Conclusion:

Therefore, individuals are the only ones who can assess their own worth. In general, better total utility is associated with more consumption of a good.

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Most popular questions from this chapter

The price of cheese rises from \(6 to \)10 per pound, while the price of wine remains \(3 per glass. For a consumer with a constant income of \)3,000, show what happens to consumption of wine and cheese. Decompose the change into income and substitution effects.

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

a. Show the effect of the frost on Maya鈥檚 budget constraint.

b. Show the effect of the frost on Maya鈥檚 optimal consumption bundle, assuming that the substitution effect outweighs the income effect for croissants.

c. Show the effect of the frost on Maya鈥檚 optimal consumption bundle, assuming that the income effect outweighs the substitution effect for croissants.

Consumption when young and consumption when old are both normal goods for Seymour, a worker saving for retirement. When the interest rate falls, what happens to Seymour鈥檚 consumption when old?

a. It definitely increases.

b. t definitely decreases.

c. It increases only if the substitution effect exceeds the income effect.

d. It decreases only if the substitution effect exceeds the income effect.

Question:At any point on an indifference curve, the slope of curve measures the consumer鈥檚

a. income

b. willingness to trade one good for the other

c. perception of two goods as substitutes or complements.

d. elasticity of demand

Explain all the reasons why a decrease in a product's price would lead to an increase in purchases
See all solutions

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