The law of diminishing marginal utility says the additional satisfaction that on
ID: 2440245 • Letter: T
Question
The law of diminishing marginal utility says the additional satisfaction that one derives from repeated consumption of a good or services successively declines starting from the second unit.Given that, what is the implication of this consumer behavior on the way a family allocates our resources? The law of diminishing marginal utility says the additional satisfaction that one derives from repeated consumption of a good or services successively declines starting from the second unit.
Given that, what is the implication of this consumer behavior on the way a family allocates our resources? The law of diminishing marginal utility says the additional satisfaction that one derives from repeated consumption of a good or services successively declines starting from the second unit.
Given that, what is the implication of this consumer behavior on the way a family allocates our resources?
Explanation / Answer
The implication of the law of diminishing marginal utility is that family allocates its resources to consume different goods in such a way that utility drawn from the consumption is maximized. In this regard, the family identifies marginal utility per dollar of each unit of each type of products and services. Afterwards, it buys the unit of goods that gives maximum MU per dollar among all the available choices. Next, the family chooses to consume the unit of goods, that provides second higher marginal utility per dollar. In the same way, whole resource is exhausted and utility is maximized.
So, the law of diminishing marginal utility strongly impacts the consumer behavior and it behaves in a way that maximizes the total utility by focusing upon marginal utility per dollar.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.