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Marginal Benefits

Consider how marginal benefits and marginal costs fit into Luke’s decision, and how the concept of diminishing marginal utility is at work as Luke eats more and more eggs.

a. What is driving his marginal benefits to continue to exceed his marginal cost?

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b. Consider how Luke’s decision would change if he had to actually pay for each egg he eats. How would this affect his choice to continue eating?

c. Consider the concept of marginal utility per dollar spent (i.e. MU/P) and how it affects the consumption decisions we make. Think of a time when you ended up buying your second choice instead of your first choice. Explain how that decision was made because it wasn’t only about marginal utility for you, but about marginal utility per dollar spent.

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