Asked by Anthony Flesher on Jul 26, 2024
Verified
While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed and would only receive 5 units of satisfaction from consuming a second slice, at the same price. Based on this information, we can conclude that
A) Alex may have to lower the price to convince Kara to buy a second slice.
B) Kara will not eat a second slice, even if it is given to her at no charge.
C) Kara will definitely want to buy a second slice of pizza.
D) even if Kara buys a second slice, she will not buy a third slice.
Diminishing Marginal Utility
Diminishing marginal utility is an economic principle stating that as a person consumes more of a good or service, the satisfaction (utility) gained from each additional unit decreases.
Satisfaction
The feeling of pleasure or contentment arising from meeting one's needs, desires, or expectations.
- Familiarize oneself with the notion of diminishing marginal utility and its ramifications on buying habits.
- Understand the impact of variations in product prices on consumer decisions and the principle of income effect.
Verified Answer
JA
Johnny AppleseedAug 01, 2024
Final Answer :
A
Explanation :
Diminishing marginal utility means that the additional satisfaction Kara gets from consuming each additional slice of pizza decreases. Therefore, Alex may need to lower the price to make the second slice appealing enough for Kara to purchase, given that her satisfaction from the second slice is less than from the first.
Learning Objectives
- Familiarize oneself with the notion of diminishing marginal utility and its ramifications on buying habits.
- Understand the impact of variations in product prices on consumer decisions and the principle of income effect.
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