Diminishing Marginal Utility Between the two Scenarios - 550 Words

Diminishing Marginal Utility: Differences Between the two Scenarios (Essay Sample) Content: Diminishing Marginal UtilityNameInstitutionIntroductionMarginal utility is an economic term that states that as a person increases the consumption of a particular good or service, while refraining from consuming other goods and products, the marginal utility derived from consuming that good or product diminishes with every subsequent consumption of a unit of that good or product (Investopedia, 2004).Based on the law of diminishing marginal utility, on the first day of receiving the news, I would be very excited. The satisfaction that comes from the win would e enhanced by eating the pizza, because on that day, I would not have anything else to eat. The first day will be the day when consuming the pizza will be at the optimal utility level.On the tenth day of receiving the news, I would be less enthusiastic about the win. The law od diminishing utility operates on the premise that consuming the good continually while withholding the consumption of other goods decreases the marginal utility. Therefore, on the tenth day, the marginal utility of the win, and the consumptions of the pizzas would have decreased significantly.On the 30th day, I would not experience any marginal utility. This decrease in marginal utility is based on the fact that human beings are rational consumers, and will consume a product rationally, observing the utility and cost involved. Consuming pizzas for a whole month would greatly diminish the marginal utility.Part BThe law of diminishing utility assumes that consumption is continuous and that there are no gaps that are put between consuming the product. In the gasoline scenario, the marginal utility on the first day would be the same as the pizza scenario. It would be very high. However, unlike in the pizza scenario, gasoline consumption is not continuous. One would need to consume the gasoline in the tank before needing more. This break would imply that the marginal utility rule is not complied with completely.On the tenth day of the win, the marginal utility will not have reduced from the utility that was experienced on the first day. This assertion is based on the premise that the law of diminishing utility would have been broken because of the nature of product.On the thirtieth day, the marginal utility will not have declined. The law of diminishing utility assumes that the consumer does not change his customs, habits, and fashions (Mundra, 2015). If ones driving habits were premised on the amount of gasoline they would afford, then the rule would cease to apply because then, the gasoline winner would drive longer distances, thus increasing the utility of the gasoline.