Sharon has eaten a lot of pizza in the past few years. In fact, she’s growing ti

Question

Sharon has eaten a lot of pizza in the past few years. In fact, she’s growing tired of pizza. Recently, she realized that pizza no longer brings her the same satisfaction, falling from 12 utils to 7 utils. Benefiting from higher productivity, Sharon’s favorite pizzeria also lowered prices from $2 to $1 per slice. What happens to Sharon’s marginal utility per dollar spent?
A. It increases.
B. It decreases.
C. It stays the same.
D. The rate of change decreases.
E. There is not enough information to determine.

Explanation / Answer

answer is (b) that is it decreases.

Marginal utility is the additional satisfaction which consumers derives from additional consumption of unit. According to law of diminishing marginal utility continuous consumption of one product keeping other factors constant will lead to less satisfaction of that product. In the given case Sharon is eating pizza on a regular basis in past few years which has lead to decline in satisfaction level.

The given case is related to law of diminishing marginal utility where as the consumption of product increases the satisfaction level decreases.

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