With diminishing marginal utility, how do consumers decide how much to consume? Students are expected to give a detailed answer to this question. You must include an explanation about what diminishing marginal utility means in your answer. Concepts such as "budget constraint", "more is better", "utility", "marginal utility", and "marginal utility per dollar spent" must be used in your answer. No graph or calculation is required in this question.

With diminishing marginal utility, how do consumers decide how much to consume? Students are expected to give a detailed answer to this question. You must include an explanation about what diminishing marginal utility means in your answer. Concepts such as "budget constraint", "more is better", "utility", "marginal utility", and "marginal utility per dollar spent" must be used in your answer. No graph or calculation is required in this question.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.3P

See similar textbooks

Similar questions

Graphical and Intuitive Optimization Consider a consumer who must allocate their available income between the consumption of two goods, Beer and Pizza. Their preferences over Beer and Pizza adhere to the usual assumptions we have made about preferences. The indifference curve map below reflects their preferences and the budget constraint reflects current income and prices. In the simplest terms possible, define or explain the term "Marginal Utility of Beer" (MUB). In the simplest terms possible, define or explain the term "Marginal Rate of Substitution of beer for pizza" (MRSBP). In the simplest terms possible, intuitively explain the meaning of MUB/PB, where PB represents the price of one unit of Beer.
Using graph, explain when consumer maximize his utility? - Draw the graph Explanation
Question3 a) Suppose a household is faced with the choice between consuming gasoline (G) and all other goods (OG). Today the household consumes 800 liter of gasoline a year.Suppose then that a gasoline price increase is perfectly compensated by a wage increase. If the family followed the utility maximization model, how would this affect their consumption of gasoline? Explain by using a figure. b) Explain by using an example why an MRS (Marginal Rate of Substitution) between two goods must equal the ratio of the price of the goods for the consumer to achieve maximum satisfaction?
In our basic model of utility maximization, identify the graphical representations of the following concepts: (a) Preferences (b) Resource scarcity
a) You need to take a trip by a car to another town that you never visited before. Therefore, you are studying a map to determine the shortest route to your destination. Depending on which route you choose, there are five other towns (call them A, B, C, D, E) through which you might pass on the way. The map shows the mileage along each road that directly connects two towns without any intervening towns. These numbers are summarized in the following table, where a dash indicates that there is no road directly connecting these two towns without going through any other towns. Table 3: Miles between Adjusted Towns Town A B C D E Destination Origin 40 60 50 A 10 70 B 20 55 40 с 50 D 10 60 E 80 i) Formulate a network model for his problem as a shortest path problem by drawing a network where nodes represent towns, links represents roads, and numbers indicate the length of each link in miles. ii) Use the network form in i) to find the shortest path from origin to the destination.
Law of equi marginal utility is an important law of cardinal utility analysis. Explain this law with the help of its assumptions. Also explain the mechanism that how the total utility will be maximum at a point when the marginal utilities of both the goods become equal. Furthermore, there is a relationship between total and marginal utilities where they both pass through different stages when the consumer continues his or her consumption regularly. Describe this case briefly
If we have money, we buy goods and services to satisfy our needs. In economics, thesatisfaction that we get from the consumption of goods and services is called utility. Usea utility graph to explain what happen to the utility when you keep on increasing thenumber of units consumed. Also explain what happens to the utility when you keep onincreasing the number of units consumed. Also explain what happens to the additionalutility (i.e. additional satisfaction) when you increase your consumption by one unit
A) What is substitution effect? And how it effects purchase decision of consumer? in detail B)What is intertemporal choice? And how it is elaborated in economics? in detail
On a given evening, J. P. enjoys the consumption of cigars (c) and brandy (b) according tothe functionU(c, b) = 20c− c²+ 18b − 3b²a. How many cigars and glasses of brandy does he consume during an evening? (Cost isno object to J. P.)b. Lately, however, J. P. has been advised by his doctors that he should limit the sum ofglasses of brandy and cigars consumed to 5. How many glasses of brandy and cigarswill he consume under these circumstances?
Number of Sodas per day Total Utility Marginal Utilit 1 20 35 3 47 12 4 10 Refer to the table, The marginal utility of the second soda per day is L. (Answer should be in the form of numerical characters, e.g. 20) Enter your answer here
Utility is given as: U(x, y) = x^1/2y^1/2 (a) Graph a typical indifference curve for this function. (Hint: Choose a level of utility and draw various combinations of x, y that result in that level (b) Write down the marginal utility of both x and y. (c) What is the marginal rate of substitution (MRS) for this function? (d) Give examples of goods that are well represented by this model.
Use the midpoint method of calculating percentage changes in this question. Heidi used to bake and sell 3 custom cakes each week when the price of cake was $35. Now that the price has increased to $45, she bakes and sells 5 cakes. What was the 'percentage change' in quantity supplied of cakes for Heidi? %. Is this 'percentage change' positive or negative? What was the 'percentage change' in price of cakes? %. Is this 'percentage change' positive or negative? What was Heidi's price elasticity of supply? (round to 2 decimal places] Is this considered 'elastic', 'inelastic', or 'unit elastic'?