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Chapter 20: Q. a- For Critical Thinking (page 443)

What fact ultimately constrains consumption of any item said to be available in "unlimited" amounts at a fixed price? (Hint: Recall the law of diminishing marginal utility.)

Short Answer

Expert verified

The phenomenon of diminishing marginal utility describes how each additional unit of gain leads to an ever-smaller rise in subjective value.

Step by step solution

01

Introduction of consumption increase.

The marginal utility of each additional unit decreases as consumption increases, according to the law of diminishing marginal utility.

02

Reasons for consumption of any item said to be available in "unlimited".

In economics, utility refers to the total satisfaction gained from consuming a good or service. In economic principles based on objective decision, individual satisfaction maximising is generally presumed.

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