(3) Some Insights From the Diminishing Marginal Utility Concept
Utility, Consumer Choice, Marginal Utility, Diminishing Marginal Utility, Consumer Surplus, Diamond-Water Paradox, "all you can eat" price as marginal value
This discusses some of the insights into observable behavior that emerge from the concept of Diminishing Marginal Utility. It explains the "all you can eat" restaurant and the "Diamond-Water Paradox." It then introduces the economic concept of "Consumer Surplus" and explains how price is used as a measure of marginal value.
Crane, Steven E., "(3) Some Insights From the Diminishing Marginal Utility Concept" (2011). Principles of Microeconomics. Paper 28.
Ability to explain the consumer choice problem regarding consumption of a single good. Ability to explain the "diamond-water paradox" and "all you can eat" restaurant phenomenon. Ability to explain the concept of Consumer Surplus, and to identify it on a graph. Ability to explain how and why "price measures value at the margin."
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