10. The table below contains information about the total utility you gain from coffee you buy...
10. The table below contains information about the total utility you gain from coffee you buy from a coffee shop.
|
Cups of Coffee |
Total Utility in $ amount |
|
1 |
1.5 |
|
2 |
2.7 |
|
3 |
3.6 |
|
4 |
3.6 |
|
5 |
2 |
- Does this example exhibit the diminishing marginal utility principle? Explain.
- How many cups of coffee will you buy if the price of each cup is $1? Explain.
- At what price, would you buy three cups of coffee? Explain.
Homework Answers
Ans. A. Yes , because when the Consumption of cups of coffee increases , the marginal utility derived from each additional unit keeps on decreasing.
B. 2 cups of coffee.
C. Any price Below 0.9 per cup . When cups of coffee are 3 , the Marginal utility is 0.9 , hence any price Below 0.9 would induce the customer to buy 3 cups of coffee.
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