5) In no more than five (5) lines of typed text below this question describe the...

5) In no more than five (5) lines of typed text below this question describe the role of “marginal utility per dollar” in decisions whether to purchase goods and services.

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Expert Solution

Marginal utility per dollar is the part of the marginal principle of the economics that is used to calculate the marginal utility per dollar of each additional unit of goods and services purchased. With each additional purchase of goods, the utility decreases (as per the diminishing marginal utility rule) and marginal utility per dollar also comes down. Here, the buyer compares the marginal utility per dollar of any unit with the purchase of another good and marginal utility per dollar of that good. If the marginal utility per dollar of good 1 is less than the marginal utility per dollar of good 2, then good 2 will be purchased and good 1 will not be purchased. Here, the rule of marginal utility per dollar will help in maximizing the utility per dollar spent.
The rule is also used to create a balance when different factors of production are purchased. At equilibrium, marginal utility per dollar of each factor of production will be equal for all the factors of production.

Rahul Sunny answered 1 year ago

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