Question

Use the concept of marginal utility to explain the following: Newspaper vending machines are designed so that once you have paid for one paper, you could take more than one paper at a time. But soda vending machines, once you have paid for one soda, dispense only one soda at a time

Short answer

Answer: The difference in the design of newspaper and soda vending machines can be explained by the concept of marginal utility. The marginal utility of an additional newspaper is low because having multiple copies does not provide extra benefits, while the marginal utility of an additional soda is higher as it can provide additional satisfaction. Thus, vending machines allow customers to take multiple newspapers without a strong incentive to abuse the system, whereas soda vending machines only dispense one soda at a time to prevent customers from taking more than they have paid for.

Step-by-step solution

Definition of Marginal Utility

Marginal utility is the additional satisfaction or benefit that a consumer receives from consuming an additional unit of a good or service. In this context, we will compare the marginal utility of newspapers and sodas.

Analyzing Marginal Utility of Newspapers

In the case of newspapers, the marginal utility of an additional paper is generally low. This is because the information in each paper is the same, and having more copies does not provide additional benefits to the consumer. Therefore, the consumer's satisfaction does not increase significantly after acquiring the first newspaper.

Analyzing Marginal Utility of Sodas

On the other hand, the marginal utility of an additional soda is relatively higher than that of newspapers. When you consume an extra soda, you may experience additional satisfaction due to a variety of reasons, such as quenching your thirst, enjoying the taste, or boosting your energy level. Hence, the marginal utility of an additional soda is higher than that of an additional newspaper.

Vending Machine Designs Based on Marginal Utility

Since the marginal utility of an additional newspaper is low and people do not have a strong incentive to acquire more than one, the design of newspaper vending machines allows customers to take multiple newspapers after paying for one. It is unlikely that people would abuse this system due to the low marginal utility of additional newspapers, and the cost of preventing abuse (e.g., by designing vending machines that dispense only one newspaper) might outweigh the potential benefits. However, the marginal utility of an additional soda is higher, so the design of soda vending machines only allows customers to take one soda per payment. This is to prevent customers from taking more sodas than they have paid for.

Conclusion

In conclusion, the concept of marginal utility can be used to explain the difference in the design of newspaper and soda vending machines. The low marginal utility of additional newspapers does not encourage consumers to take more than one, while the higher marginal utility of additional sodas makes it necessary for vending machines to dispense only one soda at a time.

Key concepts

Consumer Behavior

Examining consumer behavior helps us understand why people make certain choices when they purchase goods or services. At the heart of this is the concept of utility, which describes the satisfaction or benefit that people gain from consumption.
Consumers aim to maximize their total utility by choosing the best option that fits within their budget.
For each additional unit of a product they consume, the satisfaction they get is known as marginal utility. It'll often decrease as more of the product is consumed because people tend to desire variety. When we apply this to newspapers and sodas, the marginal utility of drinking another refreshing soda is higher because each soda can offer a different flavor or effect, such as quenching thirst or raising energy levels.

For newspapers, however, once a consumer has read one, grabbing more copies doesn’t add much value since they contain the same information. Hence, the consumer's behavior reflects an unlikelihood to take more newspapers, enhancing understanding of why certain vending machines are designed as they are.

• Consumers aim to maximize utility.
• Marginal utility decreases with additional consumption.
• Vending machine design reflects these principles.

Vending Machines

Vending machines are automated systems that provide products such as drinks, candy, or newspapers. The design of these machines reflects the behavior and preferences of consumers.
Different products create different needs in vending machines due to the varying marginal utility of items.
For instance, a newspaper vending machine hinges on trust; it is built to allow customers to take more copies even if they pay for one. This setup is feasible because the additional value (or utility) received from extra newspapers is low, thereby preventing abuse.

For soda vending machines, the story is different. Due to the higher marginal utility, these machines are designed to safeguard against dispensing more than one item per payment. They ensure that each soda, which carries high significance in taste and satisfaction, is valued accurately and not taken advantage of.

• Newspaper vending uses a trust-based design.
• Soda machines prevent excessive product withdrawal.
• The design aligns with marginal utility principles.

Product Consumption

Product consumption is an essential concept in understanding vending machine design and consumer satisfaction. It revolves around how and why individuals use various products as part of their purchasing decisions.
In the context of vending machines, consumers choose differently based on the given product’s utility.
Newspapers offer a low subsequent utility beyond the first copy because they contain identical information. Therefore, if offered the chance, people rarely take more, as the consumption of additional units doesn't add extra value.

Conversely, consuming additional sodas offers higher satisfaction due to their broader appeal and potential for variety, taste, and energy boost. This different level of attraction and value influences how consumption patterns materialize, shaping machines' functionalities accordingly.
The variation in consumption underscores why vending designs are product-specific.

• Consumption decisions are utility-based.
• Sodas offer incremental value with each unit consumed.
• Identical newspapers diminish additional satisfaction.

Economic Design

Economic design involves creating systems and products in a way that maximizes efficiency and aligns with consumer behaviors and needs. In vending machines, this means thoughtfully engineering how products are dispensed based on the perceived and actual benefits they provide.
Designs that incorporate economic principles address product-specific factors like marginal utility.
For newspapers, the abundance and low value derived from additional copies allow for a design trusting the consumer not to take excess. It’s efficient since deploying complex mechanisms doesn't provide tangible benefits.

Soda vending machine designs are optimized differently. They focus on minimizing potential loss from abuse due to the high desirability and value of additional sodas. Efficient economic design ensures machines meet consumer demand while sustainably maintaining profit and product stock levels. This creates trust in product availability and fairness in accessibility.

• Design reflects economic efficiency.
• Different products require tailored designs.
• Consideration of utility maximizes product availability.