Question

Explain the concept of utility maximization. What is the utility maximization rule? What role does the law a diminishing marginal utility play in utility maximization? 

Answer 1

Utility maximization is the maximum amount of satisfaction that you get to achieve when you consume particular good or service. The utility maximization rule states that the maximum utility can be achieved when the last dollar spent on each goods are actually same on the marginal utility is same for all the goods. the diminishing marginal utility plays a major role in maximizing utility condition where if the utility is measured in Dollars than the cost of each good would be $x, the consumption will be in such a way that it the utility for the first unit is maximum and subsequently the utility decreases and at a level the utility even drops below the cost and this is set to be the maximum utility point where the marginal utility equals the cost and because the utility is decreasing with consumption, marginal utility plays a major role in determining the maximum utility