(Old Version) Utility Maximization: Diminishing Marginal Utility

Mr. Clifford explains utility maximization using an example of avocados and mangoes with a $70 budget. He discusses the law of diminishing marginal utility and emphasizes calculating marginal utility per dollar spent. The video guides viewers through a decision-making process to maximize utility by choosing the optimal combination of goods.

What economic principle explains the decrease in satisfaction from consuming additional units of a good?

• Law of Diminishing Marginal Utility

• Law of Supply

• Law of Demand

• Law of Increasing Returns

If an avocado costs $5 and provides 30 utils, what is the marginal utility per dollar spent?

• 4 utils per dollar

• 5 utils per dollar

• 6 utils per dollar

• 3 utils per dollar

Why is it important to calculate the marginal utility per dollar spent?

• To calculate total expenditure

• To find the cheapest goods

• To maximize satisfaction within a budget

• To determine the total utility of all goods

In the example, how many avocados and mangoes should be purchased to maximize utility?

• Three avocados, two mangoes

• One avocado, four mangoes

• Two avocados, three mangoes

• Four avocados, one mango

What is the total expenditure when buying two avocados and three mangoes?

• $75

• $60

• $65

• $70