5 Questions
What are the three possible states of marginal utility?
Positive, negative, or zero.
What is marginal utility?
Marginal utility describes the change in pleasure or satisfaction resulting from the consumption of one unit of a good or service.
Provide an example of positive marginal utility from the text.
The second piece of pizza may bring more satisfaction than the first, indicating positive marginal utility.
What does negative marginal utility imply?
It implies that every additional unit consumed causes more harm than good, leading to a decrease in overall utility.
What does the law of diminishing marginal utility postulate?
It states that the first units of consumption of a good or service yield more satisfaction or utility than the subsequent units, and there is a continuing reduction in satisfaction.
Study Notes
Marginal Utility
- Marginal utility is the additional satisfaction or pleasure a consumer derives from consuming one more unit of a good or service.
- There are three possible states of marginal utility: positive, negative, and zero.
Positive Marginal Utility
- An example of positive marginal utility is when a consumer eats their first slice of pizza and it tastes delicious, providing a high level of satisfaction.
- In this case, the marginal utility is positive because the consumer wants to consume more slices of pizza.
Negative Marginal Utility
- Negative marginal utility implies that the consumption of an additional unit of a good or service leads to a decrease in satisfaction or pleasure.
- This can occur when a consumer has consumed too much of a good or service and it becomes less enjoyable or even unpleasant.
Law of Diminishing Marginal Utility
- The law of diminishing marginal utility postulates that as a consumer consumes more units of a good or service, the marginal utility of each additional unit will decrease.
- This means that the initial units of a good or service will provide a higher level of satisfaction or pleasure compared to subsequent units.
Test your understanding of marginal utility with this interactive quiz. Explore scenarios where marginal utility can be positive, negative, or zero and enhance your grasp of this key economic concept.
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