micro ch 10
Consumers have to make tradeoffs in deciding what to consume because
they are limited by a budget constraint.
If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is
57 utility units.
Which of the following is likely to occur as the result of the law of diminishing marginal utility?
Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.
Consumers maximize total utility within their budget constraint by
buying the goods with the largest marginal utility per dollar spent.
As a consumer consumes more and more of a product in a particular time period, eventually marginal utility
declines
marginal utility is the
extra satisfaction received from consuming one more unit of a product.
total utility
is equal to the sum of the marginal utilities of all units consumed
Economists assume that the goal of consumers is to
make themselves as well off as possible.
utility is
subjective and cannot be measured
If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of
the law of diminishing marginal utility.
If a consumer always buys goods rationally, then
the marginal utility per dollar spent on all goods will be equal.
Marginal utility can be
positive, negative, or zero.