In this assignment, you will focus on marginal utility, price elasticity of demand, and understanding the difference between price elasticity of demand and income elasticity of demand.
We all subconsciously assign “scores” to what we are considering purchasing, based on our expected level of satisfaction (marginal utility) with that purchase. When making simultaneous pairs of purchases, we subconsciously compare the amount of satisfaction (marginal utility) that we will receive from the pair of purchases.
To decide on the ideal combination of these two purchases, we expect that the last dollar we spend on each of the items will give us the same satisfaction per dollar (marginal utility per dollar).
Further, you know that the MORE of an item that you get, the next one we get will give us LESS satisfaction (marginal utility) than the last one gave you (the Law of Diminishing Marginal Utility). You will complete this unit’s assignment using what you have learned about marginal utility and marginal utility per dollar.
