Question

In: Economics

How do rational people go about deciding how much water they need?

How do rational people go about deciding how much water they need?

Solutions

Expert Solution

When people actually get to think rationally, the amount of water they needed to get is on the basis of of the utility e maximum level in the net. They will keep on consuming more amount of water until the time when the utility minus the cost of getting the water is always positive for the marginal utility is positive when you subtract it with the marginal cost and therefore the break even will be at a point where the marginal utility will be equal to marginal cost and till the point they will consume water.


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