Question

It seems that as the producer becomes more efficient at producing their product; the consumer tends to have less and less satisfaction from consuming one additional unit of the producer's product.   Is this true (think in terms of only one producer and consumer)? Explain your answer.

Answer 1

This statement is true

If we are considering only one producer and one consumer then we can see that if the producer is becoming more efficient in producing the output, it is actually increasing the level of output. If consumer is consuming more output then due to diminishing marginal utility, each additional unit purchased and consumed will result in lower and lower marginal utility. Marginal utility captures the additional satisfaction which indicates that the consumer will have less and less satisfaction from consuming more additional units of producer's product