Question

Hello I have these questions. I need good answers in order to undertand not so long nor so short please

1. Why do “all you can eat” restaurants not go broke?
2. What is a person’s consumption bundle?
3. What is utility?
4. What is marginal utility?
5. What is diminishing marginal utility?

Answer 1

1. An All You Can Eat [AYCE] restaurant is a type of restaurant that charges a fixed price for entry in to the restaurant after which the diners may be allowed to consume as much food as they can for which they are not charged extra. It is a buffet practice that focus on the fixed entry price to make profits. The basic mechanism behind the price fixation of an AYCE restaurant is that the fixed price that is being made is done by taking in to consideration the average cost of the items kept in the dine and the average quantity of food that is being consumed by the diners. Although there could be slight variations in the quantity of the food being consumed, it can be sort out since the items would be continuously reviewed and the changes would be made in the dine so that the establishment does not go in to a failure. Thus, by this mechanism we can see that such dines would not break.

2. A consumption bundle refers to a set of goods that the consumers prefer to consume. For example, if there are five goods taken in to consideration, then the quantity of those five goods that are being consumed would vary in accordance with the consumers. Thus, when the quantity that is being consumed is taken in to consideration, we can see that the analysis would bring out the consumption bundle of the individual which would vary according to all.

3. The term ‘Utility’ is most often used in economics that refers to the total satisfaction that would be obtained by the consumers in a market while consuming the goods and services that are available in the market. Thus, we can see that in an economy, the consumers would be always biased towards increasing the utility and the producers would be forced to increase the quality of products and services to meet the utility requirements of the consumers.

4. Marginal utility refers to the added satisfaction that a consumer would get by consuming an additional unit of the product or service available in the market. This concept is being used in an economy so as to find out how much units of quantity would each consumer purchase in the market by analysing the satisfaction measure of the consumers.

5. Diminishing marginal utility theory of economics states that the marginal utility derived from each additional unit of a product or service that is being consumed in a market would decline on consumption of each additional unit provided that all else would remain equal and the consumption would rise in the market.