📚 Learning Guide
Marginal Analysis in Economics
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In the context of marginal analysis, if a consumer experiences a decrease in marginal utility from consuming additional units of a good, how should they adjust their resource allocation to maximize overall satisfaction?

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Learning Path
Learning Path

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Choose the Best Answer

A

Increase consumption of the good

B

Decrease consumption of the good

C

Maintain current consumption levels

D

Allocate resources to a different good

Understanding the Answer

Let's break down why this is correct

Answer

In marginal analysis, marginal utility refers to the additional satisfaction a consumer gets from consuming one more unit of a good. If a consumer notices that the marginal utility is decreasing, it means that each extra unit they consume is giving them less satisfaction than before. To maximize overall satisfaction, the consumer should consider reducing the amount of that good they buy and instead allocate their resources to other goods that provide higher marginal utility. For example, if someone is eating slices of pizza and finds that the fifth slice is not as enjoyable as the first, they might choose to stop eating pizza and instead buy a dessert that they enjoy more. By doing this, they can increase their total satisfaction by focusing on what gives them the most happiness.

Detailed Explanation

When the extra satisfaction from consuming more of a good goes down, it means you should eat less of it. Other options are incorrect because Some might think that more is always better; Staying the same might seem safe, but if you're not enjoying it as much, you're missing out on better options.

Key Concepts

Marginal utility
Resource allocation
Topic

Marginal Analysis in Economics

Difficulty

medium level question

Cognitive Level

understand

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