the law of diminishing marginal utility explains why This is a topic that many people are looking for. newyorkcityvoices.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, newyorkcityvoices.org would like to introduce to you Episode 17: Diminishing Marginal Utility. Following along are instructions in the video below:
“Do people anyone really want nout of life to be happy how do people make make themselves happy by consuming things cars books travel neducation that will make them happy jim for example he really likes cookies how much happiness can he get from cookies. I mean if there were an unlimited supply nof cookies available and jim didn t have to worry about money because the cookies were nfree could we make him infinitely happy let s try this experiment with jim. But ngo ahead and feel free to try this at home. We make cookies and only cookies this nis important if you allow even a drink it ll pollute the experiment available to jim as many as he wants free of charge after he eats each cookie have him rate that ncookie based on how much it added to his overall sense of well being you know if he was hungry and loves cookies nhe d probably give it a 10 if he s already eaten or if it s just a stomach filler nit might be a 4 or a 5 and if it adds nothing whatsoever to his well being it s a 0.
I once tried using oatmeal raisin cookies nfor this experiment and the test case actually spat the cookie out on the table turned out she hated raisins since this cookie actually took away from nher sense of well being it s appropriate to give it a negative rating ok let s go back to jim jim loves cookie 1. He was hungry and it really hit the spot this first cookie added. 10 to his overall nsense of well being jim says that that cookie 2. Was really good nbut.
The first cookie already took the edge off his hunger..
He reports that the second cookie added. 8. Nto. His overall sense of well being cookie 3.
Still good. But jim s starting to fill up cookie 3 adds. 5 to his sense of well being cookie. 4.
Jim is getting pretty full he eats it to be polite..
But he doesn t get na lot of added satisfaction from it cookie. 4. Is a 2 you offer jim cookie 5. He says he rather not you insist jim eats.
The fifth cookie and now he looks na little bit green he feels worse than before he rates cookie n. 5. As a 3. What we discover from this experiment is that nif you give a consumer identical successive units of any one consumer good each unit.
Nconsumed yields less and less happiness or satisfaction..
Economists use the term utility ninstead of satisfaction than the previous unit. This is known as the law of diminishing marginal nutility. Where marginal utility is the amount added to total utility with the last unit nyou. ve consumed or the change in total utility over the change in quantity here.
s what looks like for jim pause try this based on his marginal utility figures. Nwhat is jim s total utility. That is his overall sense of well being pause at what point should jim have stopped neating cookies that is where would he have maximized his utility or happiness as a nconsumer pause consumption should stop when jim isn t nadding any more to his happiness. But isn t yet losing happiness to reach maximum utility consumption needs nto stop where marginal utility is equal to zero for jim this takes.
Place at about 4 1..
2. Cookies i encourage you to try this for yourself nas long as identical successive units of the same commodity are consumed the law of diminishing nmarginal utility will hold of course a model such as this with only none product. No prices and therefore no worry about income or budget is not entirely realistic n. But these layers are the next step.
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