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7. (a) State the Law of Diminishing Marginal Utility: This law states that as a consumer consumes additional units of a good the marginal utility/extra satisfaction derived from each additional unit consumed will eventually decline - Leaving Cert Economics - Question 7 - 2009

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7.-(a)-State-the-Law-of-Diminishing-Marginal-Utility:--This-law-states-that-as-a-consumer-consumes-additional-units-of-a-good-the-marginal-utility/extra-satisfaction-derived-from-each-additional-unit-consumed-will-eventually-decline-Leaving Cert Economics-Question 7-2009.png

7. (a) State the Law of Diminishing Marginal Utility: This law states that as a consumer consumes additional units of a good the marginal utility/extra satisfaction... show full transcript

Worked Solution & Example Answer:7. (a) State the Law of Diminishing Marginal Utility: This law states that as a consumer consumes additional units of a good the marginal utility/extra satisfaction derived from each additional unit consumed will eventually decline - Leaving Cert Economics - Question 7 - 2009

Step 1

Marginal Utility in units for 2nd Unit

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Answer

To find the Marginal Utility for the 2nd unit, we calculate the difference in Total Utility between the 2nd and 1st unit:

extMarginalUtility=extTotalUtility(2ndunit)extTotalUtility(1stunit)=6530=35 ext{Marginal Utility} = ext{Total Utility (2nd unit)} - ext{Total Utility (1st unit)} = 65 - 30 = 35

Thus, the Marginal Utility for the 2nd unit is 35.

Step 2

Marginal Utility in units for 3rd Unit

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Next, for the 3rd unit, the Marginal Utility is calculated as follows:

extMarginalUtility=extTotalUtility(3rdunit)extTotalUtility(2ndunit)=8565=20 ext{Marginal Utility} = ext{Total Utility (3rd unit)} - ext{Total Utility (2nd unit)} = 85 - 65 = 20

So, the Marginal Utility for the 3rd unit is 20.

Step 3

Marginal Utility in units for 4th Unit

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For the 4th unit, we calculate:

extMarginalUtility=extTotalUtility(4thunit)extTotalUtility(3rdunit)=10085=15 ext{Marginal Utility} = ext{Total Utility (4th unit)} - ext{Total Utility (3rd unit)} = 100 - 85 = 15

Thus, the Marginal Utility for the 4th unit is 15.

Step 4

Marginal Utility in units for 5th Unit

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For the 5th unit, the calculation is:

extMarginalUtility=extTotalUtility(5thunit)extTotalUtility(4thunit)=110100=10 ext{Marginal Utility} = ext{Total Utility (5th unit)} - ext{Total Utility (4th unit)} = 110 - 100 = 10

This gives the Marginal Utility for the 5th unit as 10.

Step 5

Marginal Utility in units for 6th Unit

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Lastly, for the 6th unit, we have:

extMarginalUtility=extTotalUtility(6thunit)extTotalUtility(5thunit)=115110=5 ext{Marginal Utility} = ext{Total Utility (6th unit)} - ext{Total Utility (5th unit)} = 115 - 110 = 5

Therefore, the Marginal Utility for the 6th unit is 5.

Step 6

Point where Diminishing Utility sets in

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Answer

Diminishing utility sets in after the consumption of the 2nd unit, when the Marginal Utility from consuming the 3rd unit decreases to 20, down from 35 for the 2nd unit.

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