Module 6 Discussion: Utility Only provide your opinions when specifically called

Question

Module 6 Discussion: Utility

Only provide your opinions when specifically called for. In all other cases your answer(s) should rely on the text and module materials and not on the internet, showing your capacity to apply the appropriate economic principles and concepts correctly.

Answer the following questions based on your knowledge of utility theory:

1. Explain the difference in between snack machines and newspaper vending machines (in case you are not familiar with newspaper vending machines you put money in the slot, the door opens and all of the newspapers are available) based on the ideas and concepts used in this module.

2. All-U Can Eat Buffet restaurants would not succeed if what economic concept covered in this module was not true? Explain.

Explanation / Answer

1)

The snack machine and newspaper machine in terms of utility they provide to the consumer.

Note- Utility is the total satisfaction derived by consuming a given quantity of a good

Marginal utility of a product is the satisfaction gained by consuming one more unit of a given product.

The diminishing marginal utility is termed as the subsequent decrease in satisfaction by consuming more and more of a given product.

Now,coming to the question,the vending machines are locked meaning once you put a coin in,you get only 1 unit of snack for consumption but in case of newspaper vending machine,once you put a coin in,you get many copies of a same newspaper and you can choose to take one.

It follows the principle of utility as consumer get more utility by consuming snacks wherein the marginal utility of extra unit may decline but is still positive.This is why the snack machines are locked to ensure consumer can only take for what they have paid for.

In case of newspaper,the marginal utility of second copy of the same newspaper is zero as they have already picked up the same newspaper and there is no additional utility from reading the same news again and this is why newspaper vending machines are not locked.

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