Question 2 A person's wilingness to pay for a good is based on (1) the availability of the good (2) the marginal benefit the good provides to them (3) the marginal cost of providing the good (4) the price of the good
Added by Samantha R.
Close
Step 1
However, if the good is scarce or hard to find, a person may be willing to pay more. (2) The marginal benefit the good provides to them: This refers to the additional benefit a person gets from consuming one more unit of the good. If the marginal benefit is high, Show more…
Show all steps
Your feedback will help us improve your experience
Benjamin Densmore and 50 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Marginal Utility Goods 1 and 2 are available at dollar prices of $p_{1}$ per unit of Good 1 and $p_{2}$ per unit of Good $2 .$ A utility function $U\left(x_{1}, x_{2}\right)$ is a function representing the utility or benefit of consuming $x_{j}$ units of good $j .$ The marginal utility of the $j$ th good is $\partial U / \partial x_{j}$ the rate of increase in utility per unit increase in the jth good. Prove the following law of economics: Given a budget of $L$ dollars, utility is maximized at the consumption level $(a, b)$ where the ratio of marginal utility is equal to the ratio of prices: $$\frac{\text { Marginal utility of Good } 1}{\text { Marginal utility of Good } 2}=\frac{U_{x_{1}}(a, b)}{U_{x_{2}}(a, b)}=\frac{p_{1}}{p_{2}}$$
DIFFERENTIATION IN SEVERAL VARIABLES
Lagrange Multipliers: Optimizing with a Constraint
The following table shows how the marginal benefit of a service varies for five consumers. Quantity 1 2 3 Serkan 150 125 100 Asuman 125 100 75 Bahar 100 75 50 Murat 200 150 125 Meric 600 400 200 Derive the demand curve for this service assuming that it is a public good. If the marginal cost of the good is 850, what is the efficient output of the public good? If the marginal cost of the good is 425, what is the efficient output of the public good? If the marginal cost of the good is 850, what is the efficient output assuming it is a private good?
Prashant B.
If good 1 is a "neutral," what is its marginal rate of substitution for good $2 ?$
Shalini T.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD