Marginal utility - The textbook definition of marginal utility is, \"the additio
ID: 1160868 • Letter: M
Question
Marginal utility - The textbook definition of marginal utility is, "the additional satisfaction or happiness received from the consumption of an additional unit of a good or service." Marginal utility is an important economic concept, because it effects the consumer's decision making with purchasing a product. This also can help producers measure how much they may sale of a product. This has impacted me, because it taught me how we can maximize our benefits. When we purchase our products, we compare the benefits to the cost. How can we get more benefits or satisfaction within our budget? For example, would it we worth paying more a front row concert ticket that may lead to a more enjoyable experience? This concept reminds me to think about how I can go about my purchase decisions.Explanation / Answer
We all face a budget constraint due to fixed and limited income . Maximizing benefits given the budget constraint is the concept of utility maximization . As per economics theory , till the marginal utility is positive we can go consuming a good . But overall utility maximization is about getting marginal utility per dollar of each good equal to each other .
If we pay more for ront row tickets then , price of movie ticket rises . This causes the ratio of marginal utility to price to fall . So we need to consume more of other goods too to maintain the balance . But since there is budget constraint so it is not possible . So as price rises , budget constraint rotates inward and we are on a lower indifference curve where utility is lesser . So it is not worth paying more for a movie ticket .