Explain the diminishing marginal utility, Managerial Economics

Assignment Help:

Diminishing Marginal Utility

Diminishing marginal utility as well is to be held responsible for the rise in demand for a product when its price declines. When an individual purchases a product, he swaps his money revenue with product in order to increase his satisfaction. He continues to buy goods and services as long as marginal utility of money (MUm) is lesser than marginal utility of commodity (MUC).

Given the price of a commodity, he modifies his purchase so that MUC = MUm. This plan works well under both Marshallian assumption of constant MUmand Hicksian assumption of diminishing MUm. When price falls, (MUm = Pc) < MUC. So, equilibrium state is upset. To get back his equilibrium state, i.e., MUm = PC, = MUC, he purchases more quantities of the commodity. For, when supply of a commodity rises, its MU falls and once again MUm = MUC. For this reason, demand for a product increases when its price falls


Related Discussions:- Explain the diminishing marginal utility

Monopolist advertise, A  monopolist has two types of customers. There are 1...

A  monopolist has two types of customers. There are 100 of Type A, who will every pay up to $10 for a single unit of the good, and 50 of Type B, who will every pay up to $8. Neithe

What is an opportunity cost?, Opportunity cost is cost of a different that ...

Opportunity cost is cost of a different that must be forgone in order to pursue a definite action. Put another way, the advantages you could have received by taking an alternative

Fundamental, Fundamental of managerial economic

Fundamental of managerial economic

What do you mean by legal monopoly, Q. What do you mean by Legal Monopoly? ...

Q. What do you mean by Legal Monopoly? Legal Monopoly: Some monopolies are engendered and protected under various laws. Inventors of new processes, devices or articles attain

Average total costs (atc), Average Total Costs (ATC) This is total cos...

Average Total Costs (ATC) This is total cost per unit of output, obtained by dividing total cost by total output i.e. ATC   =   Total Cost              Total Outp

Market structure, what kind of market structure is involved for the sale of...

what kind of market structure is involved for the sale of medicines and vitamins? explain

Central characteristics of simon satisfying behaviour model, Q. Central cha...

Q. Central characteristics of Simon satisfying behaviour model? The pattern of policy commitments which result from the bargaining process can be seen to be a specification of

Domestic workers to domestic firms, Labor demand for low-skilled workers in...

Labor demand for low-skilled workers in the United States is w= 24 -0.1E where E is the number of workers (in millions) and w is the hourly wage. There are 120 million domestic U.S

Factors for wage differential within the same occupation, FACTORS RESPONSIB...

FACTORS RESPONSIBLE FOR WAGE DIFFERENTIALS WITHIN THE SAME OCCUPATION i.     Differences in the environment:   For example a doctor sent to North Eastern Province must be pai

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd