Question

Explain one of your consumption experience that illustrates the concepts of total utility and marginal utility....

Explain one of your consumption experience that illustrates the concepts of total utility and marginal utility. In addition, discuss the mechanism of the law of diminishing marginal utility in this experoence and the impact of the related assumptions used in our course?

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Answer #1

Assume you are very hungry and went out to restaurant. You order consume one burger from which total utility / marginal utility would be highest. If you are really very hungry, marginal benefit from second burger could also be higher than first unit while as you consume third burger, your marginal benefit from 3rd burger could fall while total utility will still rise as it is the total benefit from 3 burger consumed. Your stomach might be full now and you have already ordered 4th burger, marginal utility from this burger could be negative which will reduce total benefit. Any unit of burger after 4th burger will lead to fall in total utility.

Assumptions included:

  • There is no time gap between two consecutive burger consumed.
  • Utility attained from each burger is additive.
  • Price of all burger consumed is same i.e. there is no offer such as buy 2 get free
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