Question

Would you expect marginal utility to rise or fall with additional consumption of a good? Why?

Short answer

We would expect marginal utility to fall with additional consumption of a good, as the law of diminishing marginal utility states that as consumption of a good increases, the additional satisfaction derived from each subsequent unit tends to decrease. This is primarily because as more of a good is consumed, each additional unit becomes less desirable or valuable than the previous unit. However, this law may not apply universally, and individual preferences can also play a role in determining marginal utility.

Step-by-step solution

1. Defining Marginal Utility

Marginal utility refers to the additional satisfaction a consumer derives from consuming an additional unit of a good or service. In other words, it's the change in the total utility that comes from consuming one more unit of a good.

2. Law of Diminishing Marginal Utility

The law of diminishing marginal utility states that as the consumption of a good or service increases, the marginal utility derived from each additional unit tends to decrease, given that other things (e.g., preferences, income) remain constant. The primary reason behind this pattern is that as we consume more of a good, each additional unit may become less desirable or valuable than the previous unit.

3. Application of the Law of Diminishing Marginal Utility

Let's apply this concept to a real-world example: Imagine you're hungry and decide to eat a slice of pizza. The first slice provides a high level of satisfaction (high marginal utility). As you consume the second slice, it still provides satisfaction, but the level of satisfaction (marginal utility) might be lower than the first one due to your decreasing hunger. If you continue to eat more slices, you will notice that each additional slice provides less satisfaction (lower marginal utility). Eventually, your marginal utility may become negative if you are overeating and start to feel uncomfortable.

4. Conclusion

Based on the law of diminishing marginal utility, we would expect marginal utility to fall with additional consumption of a good. This is because as more of a good is consumed, each additional unit typically provides less satisfaction than the previous unit. However, it's important to note that this law may not apply to every good or situation, and consumers' preferences can also play a role in determining the marginal utility derived from the consumption of a good.