Five Consumers Optimizing Their Choice of Fruits

What is marginal utility?

The additional pleasure or benefit a consumer gets from consuming one more unit of an item or service is known as marginal utility. It is the difference in overall utility brought about by a change in consumption of a good or service by one unit.

How should consumers optimize their choice of fruits based on marginal utility?

Explanation:

Marginal utility plays an essential role in consumer behavior theory, helping to explain how consumers make choices and allocate their limited resources among different goods and services. The law of diminishing marginal utility states that as a consumer consumes more units of a good, the marginal utility of each additional unit will eventually decrease.

To determine if consumers are optimizing their choice of fruits, we need to compare the marginal utility per dollar of each fruit. By calculating the marginal utility per dollar for both apples and pears, consumers can make informed decisions on their spending.

Calculations for Five Consumers:

Consumer 1: MUa = 10, MUp = 5

Consumer 2: MUa = 6, MUp = 8

Consumer 3: MUa = 3, MUp = 3

Consumer 4: MUa = 2, MUp = 1

Consumer 5: MUa = 4, MUp = 4

Calculating the marginal utility per dollar for each consumer:

Consumer 1: MUa/Pa = 10/1 = 10, MUp/Pp = 5/2 = 2.5

Consumer 2: MUa/Pa = 6/1 = 6, MUp/Pp = 8/2 = 4

Consumer 3: MUa/Pa = 3/1 = 3, MUp/Pp = 3/2 = 1.5

Consumer 4: MUa/Pa = 2/1 = 2, MUp/Pp = 1/2 = 0.5

Consumer 5: MUa/Pa = 4/1 = 4, MUp/Pp = 4/2 = 2

Based on the calculations, only consumer 1 is optimizing their choice of fruit as they have the highest marginal utility per dollar for apples. Consumers 3, 4, and 5 should adjust their spending by purchasing more apples and fewer pears, as the marginal utility per dollar for apples is higher than for pears. Consumer 2 should buy more apples and fewer pears until the marginal utility per dollar of both fruits is equal.