Chapter 6: Problem 10

Would you expect total utility to rise or fall withadditional consumption of a good? Why?

Short Answer

Expert verified

In conclusion, total utility is expected to rise with additional consumption of a good as long as marginal utility remains positive, although at a decreasing rate due to the Law of Diminishing Marginal Utility. However, if marginal utility becomes negative, total utility would start to decrease since additional consumption leads to dissatisfaction instead of satisfaction.

Step by step solution

Understand Total Utility and Marginal Utility

Total utility refers to the total satisfaction obtained from consuming a certain amount of a good or service. Marginal utility, on the other hand, is the additional satisfaction obtained from consuming one additional unit of a good or service.

Introduce the Law of Diminishing Marginal Utility

The Law of Diminishing Marginal Utility states that as a person consumes more units of a good or service, the marginal utility (additional satisfaction) from each additional unit consumed will decrease. This is because initially consuming a good satisfies the consumer's most pressing needs and wants, and then any further consumption serves to fulfill less urgent needs or wants.

Explain the Relationship between Total Utility and Marginal Utility

Total utility increases as long as marginal utility remains positive. As marginal utility decreases but remains positive, total utility will still increase but at a decreasing rate. However, if marginal utility becomes negative, it indicates that additional consumption of the good results in dissatisfaction rather than satisfaction, and hence total utility would start to decrease.

Apply the concept to the given exercise

In this exercise, we need to determine whether total utility will rise or fall with additional consumption of a good. Applying the Law of Diminishing Marginal Utility, we know that the marginal utility decreases as consumption increases. However, as long as marginal utility remains positive, total utility will continue to rise, although at a decreasing rate.

Conclude

In conclusion, total utility is expected to rise with additional consumption of a good as long as marginal utility remains positive. Nonetheless, the rate of increase in total utility will decrease due to the Law of Diminishing Marginal Utility. If marginal utility becomes negative, total utility would start to decrease as additional consumption leads to dissatisfaction instead of satisfaction.