Demonstrate your understanding of utility maximization with a story that incorporates the concepts of the utility....

Demonstrate your understanding of utility maximization with a story that incorporates the concepts of the utility.

A story consists of 200 - 300 words.

Expert Solution

Once there was a man who was very hungry and he said he could eat unlimited burgers. So his friend said that he would pay the hungry man to eat unlimited burgers, the hungry man agreed to this and said that he would gladly eat free burgers. The man started eating the burgers, he ate one and then another one and then the 3rd one he really enjoyed the first burger on an empty stomach but as he kept on eating the satisfaction derived from consuming the burgers kept on decreasing he noticed that as he kept eating more and more burgers the satisfaction derived from eating the burgers decreased even further and then the man could not consume anymore burgers as he did not receive any satisfaction from eating the burgers instead he started disliking them, this was because the utility derived from the consumption of extra burgers had become negative a due to the law of diminishing marginal utility. The man's utility is maximum when he consumes the first unit but it keeps on decreasing as he consumes more and more of that product and in the end becomes negative to the point that he cannot consume more of it. Hence the man could not live up to his promise of eating unlimited burgers.

Rahul Sunny answered 1 year ago

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