Question

2. Explain why restaurants that have all you can eat buffets do not go out of business. In your answer explain it using the idea of consumer satisfaction and marginal utility.

Answer 1

Ans. All you can eat buffets use the concept of diminishing marginal utility. Diminishing marginal utility is defined as the more units you consume of a good it provides lower satisfaction to the consumer. Therefore, an all you can eat buffets try to maximize/increase the satisfaction by offering excessive units of food at reasonable prices. All you can eat buffets do not go out business since the consumers can get more satisfaction from it and they will try to maximize their utility. However, the marginal utility from the consumption of an additional unit of food decreases as consumers consume more and more food in an all you can eat buffet.