Question

You learned a lot about how and why consumers make choices. Some commodities consumed by certain households can be psychologically or physically habit-forming, so that the more a person consumes of them, the more strongly one desires to consume additional quantities.

• Describe the behavior of the marginal utilities of such products. Does this explain why many people choose not to smoke, but those who do usually consume ten or more cigarettes per day? (Detailed explanation please)

Answer 1

Law of diminishing Marginal utility states that utility that an individual gets after consuming every additional unit of the commodity goes on decreasing.

But in case of commodities like cigarettes, law of diminishing marginal utility doesn't hold. Consumption of cigarettes by smokers is an exception to the law of diminishing marginal utility.

Smokers who are addicted to smoking get higher marginal utility from consuming every additional cigarette, till the smokers reach their daily fixed level of nicotine.

After the daily level of nicotine has been achieved by the smokers, then the marginal utility that the consumers will get from consuming an additional cigarette will not be higher than the previous one.