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Marginality - Reflective Exercise

Developing an understanding of the diminishing marginal utility and the relationship of this to price of a product

Those pivotal to this learning are:

The threshold concept of opportunity cost is also used.

Setting the framework for investigating this question:

'Is the price of a product for immediate consumption - like a takeaway curry - equal to its worth or benefit to a consumer?'

Tick however many of the following you think appropriate, then compare with an economist's answer(s). (a) We shall consider a takeaway curry as a representative good and apply the appropriate standard economic theory. (b) We will have to consider takeaway curries in particular because consumers buy many different types of goods for different reasons (c) We will assume that the demand curve for takeaway curries slopes downward with respect to price. (d) We will assume that consumers make rational decisions. (e) We will assume that consumers will satisfy their needs and desires.

Tick however many of the following you think appropriate, then compare with an economist's answer(s). (a) Consider the demand curve (b) Consider both demand and supply (c) Consider shifts in demand and supply (d) We will have to consider situations of towns where there are many takeaway outlets and those where there are few, as this may affect the price.

Tick however many of the following you think appropriate, then compare with an economist's answer(s). (a) All consumers will get the same benefit from the curry (b) Some consumers will get more benefit from buying a takeaway at a particular time than others. (c) An individual consumer will not always get the same benefit from a takeaway curry; it depends on the time and the place. (d) Economics assumes the benefits are all constant no matter how much is consumed.

Tick however many of the following you think appropriate, then compare with an economist's answer(s). (a) Most consumers will value the benefit obtained from consuming most of the units they consume of a good by more than the amount they paid for it. (b) A consumer will only buy a curry if the value the benefit to them from consuming it is equal to the amount they paid for it. (c) Typically, a consumer will value the benefit obtained from consuming a curry by less than the amount they paid for it. (d) Typically, a consumer gains more benefit from their marginal purchases of a curry that the amount they paid for it.

Tick however many of the following you think appropriate, then compare with an economist's answer(s). (a) If we multiply the price by the number of curries bought this shows the benefits that consumers have gained. (b) The benefits gained are the highest price that consumers would have paid for that particular curry at that time. (c) The benefits gained are always equal to the actual price that a consumer pays for that particular curry at that time. (d) The benefits to consumers are given by the demand curve. (e) We will assume that consumers want to get the most marginal benefit from their purchasing decisions (i.e. maximise marginal utility, or marginal benefit, from consumption). (f) We will assume that consumers want to get the most total benefit from their purchasing decisions (i.e. maximise total benefit, or total utility, from consumption).

Go here for a further interactive question on the subject, and compare your answer with an economist's.