Question

As marginal utility decreases, total utility

decreases by the same amount.

decreases at an increasing rate.

increases by the same amount.

increases by the inverse of marginal utility.

increases at a decreasing rate. The power of indifference curve analysis is its ability to display how ________ changes affect ________ choices. supply; consumption price; input consumption; pricing price; consumption input; pricing A(n) ________ is a quantification of relative satisfaction. enjoyment number marginality util model

Answer 1

• As marginal utility decreases, total utility : increases at a decreasing rate.

The reason being that marginal utility is the difference between any two consecutive total utilities, and if the MU starts decreasing (and still be positive), then TU would still be increasing, but at a decreasing rate.

• The power of indifference curve analysis is its ability to display how price changes affect consumption choices.

The indifference curve analysis analyses the consumption pattern, and hence, there is no space for inputs. For input, isoquant analysis is used, which is analogous to indifference curve in terms of analysis. The indifference curve does display that how price changes affects the consumption changes, and not the other way around.

• A(n) util is a quantification of relative satisfaction.

In micoeconomcis, the util is a relative measure of utility, relative - as it doesn't indicate cardinality, but ordinality.