Marginal utility

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Marginal utility

  1. 1. Marginal Utility Economics 1
  2. 2. What is it?! <ul><li>Basically….the more of a good we buy, the less satisfying it gets over time! </li></ul><ul><li>This is why we like “variety”…We get bored if we get the same thing over and over. </li></ul><ul><li>However…some things can be “necessary” items and we need them, but do not get satisfaction from buying them! </li></ul>
  3. 3. How does this fit with supply?! <ul><li>Companies are always producing new products to stimulated consumer interest. </li></ul><ul><li>People get bored with buying the same things=Develop new products, labels, advertisements, incentives, additions, etc. </li></ul>
  4. 4. Law of Diminishing Marginal Utility <ul><li>The more we buy of a good, the less satisfying the consumption becomes over time. </li></ul><ul><li>Our demand for the product decreases over time. </li></ul>
  5. 5. How Does this Compare to Price?! <ul><li>When we experience diminishing marginal utility, we will want to pay a lower price for the good. </li></ul><ul><li>We cannot justify the higher price. </li></ul>

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