📚 Learning Guide
Marginal Analysis in Economics
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In the context of marginal analysis, how does an increase in consumption of a good affect the marginal utility derived from it?

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Choose the Best Answer

A

It increases the marginal utility.

B

It decreases the marginal utility.

C

It has no effect on the marginal utility.

D

It causes the marginal utility to fluctuate unpredictably.

Understanding the Answer

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Answer

Marginal analysis helps us understand how our choices affect our satisfaction, or utility, from consuming goods. When you consume more of a good, like pizza, the additional satisfaction you get from each extra slice usually decreases. This is because the first few slices might give you a lot of pleasure, but as you eat more, you start to feel full, and each additional slice brings less joy than the one before. So, the marginal utility, or the extra satisfaction from consuming one more unit, goes down as you consume more. This concept is important because it helps people make better decisions about how much of a good to consume based on their changing levels of satisfaction.

Detailed Explanation

When you consume more of a good, the extra satisfaction you get from each additional unit usually goes down. Other options are incorrect because Some might think that more consumption always means more satisfaction; This option suggests that more consumption has no impact on satisfaction.

Key Concepts

Marginal utility
Incremental decision-making
Topic

Marginal Analysis in Economics

Difficulty

medium level question

Cognitive Level

understand

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