Asked by Britanny Espinosa on Jun 30, 2024
Verified
John consumes pizza and pasta,both normal goods.He is maximizing his utility in consumption of both goods.The price of pasta rises.Assuming that diminishing marginal utility applies to both goods,as John adjusts to this event,the marginal utility of pizza will _____,and the marginal utility of pasta will _____.
A) rise;rise
B) fall;fall
C) fall;rise
D) rise;fall
Diminishing Marginal Utility
A principle stating that as a person increases consumption of a product, there is a decline in the satisfaction or utility they derive from each additional unit.
Utility Maximization
The economic principle that individuals seek to obtain the greatest possible satisfaction from their consumption choices, given their income and prices.
- Explain the relationship between alterations in marginal utility and modifications in consumption behaviors due to price variations for standard goods.
Verified Answer
ZK
Zybrea KnightJul 04, 2024
Final Answer :
C
Explanation :
Since pasta is now more expensive, John will likely decrease his consumption of pasta, leading to a decrease in the marginal utility of pasta. As he decreases pasta consumption, he will likely increase pizza consumption, leading to a decrease in the marginal utility of pizza (due to diminishing marginal utility). Therefore, the marginal utility of pasta will rise while the marginal utility of pizza will fall.
Learning Objectives
- Explain the relationship between alterations in marginal utility and modifications in consumption behaviors due to price variations for standard goods.