The Rational Consumer
For each of the following situations, decide whether Al has increasing, constant, or
diminishing marginal utility.
The more economics classes Al takes, the more he enjoys the subject. And the
more classes he takes, the easier each one gets, making him enjoy each additional
class even more than the one before.
Al likes loud music. In fact, according to him, “the louder, the better.” Each time
he turns the volume up a notch, he adds 5 utils to his total utility.
Al enjoys watching reruns of the old sitcom
He claims that these episodes
are always funny, but he does admit that the more he sees an episode, the less
funny it gets.
Al loves toasted marshmallows. The more he eats, however, the fuller he gets and
the less he enjoys each additional marshmallow. And there is a point at which he
becomes satiated: beyond that point, more marshmallows actually make him feel
worse rather than better.
Al has increasing marginal utility of economics classes. Each additional class adds
more to his total utility than the previous class.
Al has constant marginal utility of volume of music. His total utility increases by
5 utils for each additional notch of volume, so his marginal utility is constant at
Al has diminishing marginal utility of
episodes. Although additional episodes
increase his total utility, they do so less and less. That is, his marginal utility declines.
Al has diminishing marginal utility of marshmallows. For a certain range, addi-
tional marshmallows add to his total utility, so total utility increases. But total
utility increases by less and less. In fact, total utility eventually begins to decline.
In other words, his marginal utility becomes smaller and smaller and eventually
Use the concept of marginal utility to explain the following: Newspaper vending
machines are designed so that once you have paid for one paper, you could take
more than one paper at a time. But soda vending machines, once you have paid for
one soda, dispense only one soda at a time.
After you have taken the first newspaper, the marginal utility of the second newspa-
per is zero: you don’t learn any more news by having two copies of the same paper
instead of just one. So once you have paid for the vending machine to open, you will
take only one paper. For soda, on the other hand, marginal utility is positive: after
you have drunk the first soda, the second will still give you more utility. It will give
you less utility than the first soda—that is, there is diminishing marginal utility—but
the marginal utility of the second soda is still positive. If the vending machine
allowed you to take more than one soda at a time after paying for only one, you
would. So the soda vending machine has to be designed to prevent you from taking
more than one soda, and it does so by dispensing only one soda at a time.