John likes Coca-Cola. After oconsuming one Coke, John has a total utility of 15

Question

John likes Coca-Cola. After oconsuming one Coke, John has a total utility of 15 units. After two Cokes, he has a total utility of 35 units. After three Cokes, he has a total utility of 60 units Complete the table below to show john's marginal utility for each Coke. Does john show dimishing marginal utility for Coke, or does he show increasing marginal utility for Coke? Suppose that John has dollar 9 in his pocket, if Cokes cost dollar 1 each and John is willing to spped the money to purchese the first can of Coke, would he speed the money to purchase the second can of Counton? What about the third can? It John's margeal utility for Coke keeps on increasing no matter how many Cokes he drinks would it be for to say that the is addicied to Coke?

Explanation / Answer

(a) Marginal utility = Change in total utility / Change in quantity

(b) Since MU is increasing with increase in number of cokes consumed, there is Increasing marginal utility.

(c) Since MU will increase after 1st can of Coke, he will spend the money to buy 2nd can also.

(d) Since MU will increase after 2nd can of Coke, he will spend the money to buy 3rd can also.

(e) Yes. For normal, non-addicted consumers, MU starts falling after a level of consumption, but here MU is increasing irrespective of number of units consumed. So he seems addicted.

Coke Marginal Utility (MU) 1st 15 2nd 35 - 15 = 20 3rd 60 - 35 = 25

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