Another key concept in economics is utility, as in all of the benefits that can

Question

Another key concept in economics is utility, as in all of the benefits that can be gained from consuming something. It is assumed that benefits typically decrease the more they are consumed. For example, someone may want a hotdog for lunch, but probably not two, and definitely not three; this is called diminishing marginal utility. For this discussion post please respond to the following prompts. Explain how diminishing marginal utility results in the need for consumers to make choices. How does diminishing utility switch consumption from one good to another? Make sure to include an example to illustrate your ideas. If necessary, complete additional research to support you ideas on this topic. Please be sure to validate opinions and ideas with citations and references in APA format.

Explanation / Answer

Ans- Marginal utility tells how much marginal value or satisfaction a consumer gets from consuming an additional unit of good. In microeconomics, the consumer choice is made on margins, which means consumer constantly compare marginal utility from consuming additional goods to the cost they have to incur to acquire goods. A consumer buys goods as long as the marginal utility for each units exceed it's price. A consumer stops when price exceeds the marginal utility. Marginal utility provided insight into the consumer choice of quantity and type of goods to be consumed. Consumers choose their goods by equating marginal utility of goods to it's price, which is marginal cost of consumption. The price a consumer Will's to pay for a good depends on marginal utility, the price and quantity are inversely related. The price decreases for goods when consumption increases.

Consumption is destruction of utility, still maintain the usefulness of the commodity. For example of food, as we consumer food, our hunger gets satiated with each other progressive. We feel more and more full, to the point where we are full and the MU hits zero. If we consume any more, the utility could be negative.

When consumption increases, the utility with increase consumption decreases. For eg. If you drink one glass of water your satisfaction will be high but when you keep on drinking water the satisfaction falls or we say utility of drinking water falls.

The law of diminishing marginal utility is applicable everywhere in our life, like example

1- when you are studying in an exam, don't keep reading the same subject or same topic for long. We should move on to a newer things. It should be a refrrsrefr change.

2- we do promotion as doing something new and better.we want to achieve something, for that move on to achieve newer and better things. It keeps employees motivated, give them new things to do. Otherwise they lose interest soon.

The above examples try to help and understand it in your life.

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