The law of diminishing marginal utility states that:
a. the marginal utility of all products consumed must be equal.
b. as more of a good or service is consumed, the marginal utility derived from it, relative to other products, increases.
c. as more of a good or service is consumed, the marginal utility derived from it decreases.
d. as more of a good or service is consumed, the marginal utility derived from it, relative to other products, remains the same.
e. the marginal utility of the last unit consumed of any good is less than the marginal utility of all other products consumed.
The law of diminishing marginal utility states that:
a. the marginal utility of all products consumed must be equal.
b. as more of a good or service is consumed, the marginal utility derived from it, relative to other products, increases.
c. as more of a good or service is consumed, the marginal utility derived from it decreases.
d. as more of a good or service is consumed, the marginal utility derived from it, relative to other products, remains the same.
e. the marginal utility of the last unit consumed of any good is less than the marginal utility of all other products consumed.
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3. Amy is shopping at a dollar store. She is currently buying 5 bracelets that cost $1 each and 4 sodas that cost $1 each. The table below indicates the marginal utility she obtains when she purchases this combination.
| Quantity | Price per Unit | MU per unit | |
| Bracelets | 5 | $1 | 30 |
| Sodas | 4 | $1 | 40 |
A consumer maximizes utility when the last dollar spent on any good generates the same satisfaction as the last dollar spent on every other good. Is this consumer maximizing her utility?
If not, should she consume more bracelets or more sodas? Explain.
Answer the following assuming that one more bracelet is purchased and one less soda is consumed:
Recall the law of diminishing marginal utility. What happens to the Marginal Utility of bracelets and the Marginal Utility of soda?
What happens to the Total Utility received?
What happens to the total dollars spent?
The law of diminishing marginal utility (LODMU) states that:
| as more and more of a good is consumed, beyond a point marginal utility will increase at a decreasing rate |
| the quantity of a good demanded will rise as the price is lowered, holding all other factors constant |
| the demand for goodwill rise as the price is lowered, holding all other factors constant |
| if an individual increases consumption of one good, then consumption of other goods must decrease because the individual has a finite income and goods have positive prices |
| none of the above options are correct |
