Syndicate
Applying the Formula of Goods Services
It is a good idea to keep in mind the rule that maximizes total utility. In order to do this, simply reorganize your buying in such a way so that the last units of each good the marginal utility per dollar are the same. If this does not happen, one of the goods will offer you more quantity of satisfaction per dollar that is spent, and then you will want to reorganize your buys to spend more on that good. Only when the equation is valid will you not want to reorganize more, because none of the other goods offers you more satisfaction per dollar then the other.
The marginal utility equation can be done for several goods and services too. If any of the other goods has a greater marginal utility then the others, you will reorganize your buys to buy less of the others and more of that specific good, and you will continue to reorganize it until it is valid.
Deriving the Demand Curves from a Decrease in Marginal Utility
A decrease in marginal utility is one of the reasons that the demand curves have negative downfalls and slopes. If you main goal is to use your money in buying as much utility as possible in order to be as happy as you can, you would be willing to pay less on each additional amount, because each addition to it provides you less utility then the one before.
A decrease in marginal utility is one of the reasons that the demand curves have negative downfalls and slopes. If you main goal is to use your money in buying as much utility as possible in order to be as happy as you can, you would be willing to pay less on each additional amount, because each addition to it provides you less utility then the one before.