Question

If we know Olivia King's demand schedule, we can find \((\mathrm{LO1}, 3)\) a) her marginal utility, but not her total utility b) her total utility, but not her marginal utility c) both her total utility and her marginal utility d) neither her total utility nor her marginal utility

Short answer

Knowing Olivia King's demand schedule allows us to find her marginal utility, but not her total utility. Therefore, the correct answer choice is: a) her marginal utility, but not her total utility.

Step-by-step solution

Understanding demand schedule

A demand schedule shows the quantity of a good that an individual is willing to purchase at each possible price. It is essentially a representation of the individual's preferences for different quantities of a good at different prices. #Step 2: Understanding total utility and marginal utility#

Understanding total utility and marginal utility

Total utility is the overall satisfaction derived from consuming a certain amount of a good, and marginal utility is the additional satisfaction derived from consuming one more unit of the good. Total utility increases as more units of a good are consumed but at a decreasing rate, while marginal utility typically decreases for each additional unit consumed. #Step 3: Identify how demand schedule relates to total utility and marginal utility#

Identify how demand schedule relates to total utility and marginal utility

The demand schedule reflects the individual's willingness to buy certain quantities at specific prices, and it can provide information about the marginal utility of the additional units of goods consumed. By analyzing how much more the individual consumes at different prices, we can infer information about the changes in marginal utility. #Step 4: Determine which utility aspects can be inferred from the demand schedule#

Determine which utility aspects can be inferred from the demand schedule

By knowing Olivia King's demand schedule, we can infer the marginal utility (how much her satisfaction changes with additional consumption at different prices). However, merely knowing the demand schedule doesn't allow us to calculate her total utility since it only provides information about the relationship between quantity and price, and not the cumulative satisfaction. #Step 5: Select the appropriate answer choice#

Select the appropriate answer choice

Based on our analysis, it is clear that knowing Olivia King's demand schedule allows us to find her marginal utility but not her total utility. Therefore, the correct answer choice is: a) her marginal utility, but not her total utility.

Key concepts

Demand Schedule

A demand schedule is a fundamental concept in microeconomics that illustrates the quantity of a good an individual is willing and able to purchase at various price levels. It's essentially a list that shows different prices and the corresponding quantities demanded. This schedule helps us understand consumer behavior and preferences.

Here's why it's important:

• It provides insight into how quantity demanded changes with price.
• It assumes that all other factors remain constant (ceteris paribus), ensuring that price is the only variable affecting demand.
• This schedule helps us predict consumer reactions to price changes.

The demand schedule can visually show us how consumers like Olivia King react to different price points, allowing businesses and economists to better understand and predict market trends.

Total Utility

Total utility is a key concept that measures the total satisfaction a person gets from consuming a certain amount of a good or service. For instance, if someone enjoys ice cream, their total utility increases as they consume more of it because they derive pleasure or satisfaction from each scoop.

However, it's crucial to remember:

• Total utility increases at a decreasing rate as more units are consumed, due to the law of diminishing marginal utility.
• This means that as you consume more, each additional unit adds less to your overall satisfaction.
• The total utility concept helps us understand why people stop consuming at a certain point.

In the context of the exercise, while we can infer the marginal utility from the demand schedule, knowing only the demand schedule doesn't give us the complete picture of Olivia's total satisfaction from consuming multiple units.

Microeconomics

Microeconomics is a branch of economics focusing on the actions and behaviors of individual agents, like consumers and businesses. It examines how these entities make decisions based on scarcity and the trade-offs they face. It's all about looking at the small-scale economic activities.

Key aspects of microeconomics include:

• The study of supply and demand, including how prices are set and how markets operate.
• An understanding of elasticity, which measures how much demand or supply reacts to changes in price.
• Analyzing consumer choices and product allocation, highlighting the roles of substitution and budget constraints.

In Olivia King's scenario, microeconomic principles help us use her demand schedule to deduce her behavior and marginal utility, showcasing microeconomics' practical applications in understanding individual market participants.