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Chapter 6: Q.7 (page 152)

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

Short Answer

Expert verified

Yes, marginal utility falls with each additional unit of consumption.

Step by step solution

01

Step 1:Definition

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.

02

Explanation

According to the law of declining marginal utility, the price a customer is ready to pay for a good is determined by its marginal utility, which decreases with each additional unit of consumption.

The concept of diminishing pricing is intimately related to the law of diminishing marginal utility. Consumers are willing to pay lesser dollar amounts for more of a thing when its utility diminishes as its usage increases.

03

Step 3:Conclusion

Since this is due to the fact that each unit of consumed goods creates less additional utility.

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Most popular questions from this chapter

Show a consumer鈥檚 budget constraint and indifference curves for wine and cheese. Show the optimal consumption choice. If the price of wine is \(3 per glass and the price of cheese is \)6 per pound, what is the marginal rate of substitution at this optimum?

The rules of politics are not always the same as the rules of economics. In discussions of setting budgets for government agencies, there is a strategy called 鈥渃losing the Washington Monument.鈥� When an agency faces the unwelcome prospect of a budget cut, it may decide to close a high-visibility attraction enjoyed by many people (like the Washington Monument). Explain in terms of diminishing marginal utility why the Washington Monument strategy is so misleading. Hint: If you are really trying to make the best of a budget cut, should you cut the items in your budget with the highest marginal utility or the lowest marginal utility? Does the Washington Monument strategy cut the items with the highest marginal utility or the lowest marginal utility?

Mr. Burns buys only lobster and chicken. Lobster is a normal good, while chicken is an inferior good. When the price of lobster rises, Mr. Burns buys

  1. less of both goods.

  2. more of lobster and less chicken.

  3. less lobster and more chicken.

  4. less lobster, but the impact on chicken in ambiguous.

If Edma buys more pasta when the price of pasta increases, we can infer that for Edma

  1. pasta is a normal good when the income effect exceeds the substitution effect.

  2. pasta in a normal good for which the substitution effect exceeds the income effect.

  3. pasta is an inferior good when the income effect exceeds the substitution effect.

  4. pasta in an inferior good for which the substitution effect exceeds the income effect.

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