If a consumer is buying so much of goods where the marginal utility of those goods equals the price, then he/she must be behaving optimally. A consumer would be better off if the price equals marginal utility.
If the goods are purchased where marginal utility does not equal price, then a consumer might not be behaving rationally.
Maximization of marginal utility is taken in to the consideration while determining the consumption level of goods and service.
The marginal utility is the utility derived from the consumption of last unit. After the consumption of each unit a consumer gets additional utility which is called as a marginal utility. An increase in the consumption of the same commodity is likely to reduce the utility derived from each successive unit. The marginal utility diminishes according to an increase in the consumption.
Marginal utility differs from person to person. A consumer's feelings towards the commodity differ. It depends on the intensity of the consumer, that how urgently the consumer wants the commodity.
A thirsty consumer needs water or any cold drink to drink. First glass of the water makes him feel relax. Second glass of water gives him/her relatively less utility than first one.
We conclude that when the consumer is thirsty his marginal utility is highest for the first glass of water. His marginal utility becomes less after the consumption of second glass of water. Marginal utility of the third glass of water is minimal because now consumer is not thirsty.
In the given example, one can only say that consumer gets highest or lowest marginal utility after the consumption. You cannot measure his satisfaction or the relief after the consumption. The satisfaction is immeasurable.
Thus, one would not find the exact marginal utility on the basis of psychological measurement.
Investing money in the stock market would be a rational course of course. If the stock market is increasing rapidly, then one should invest money in the stock market rather than holding it.
If one would hold the money, then the value of the money is not going to rise. One can get income on the invested money in the stock market.
Thus, to invest in the stock market, which has been rising rapidly for past 18 months, is rational course of action.
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