Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-Suppose you go out with your friend for coffee and donuts at the local donut store. The first donut you eat tastes incredibly good. The second one also tastes pretty good. The third donut seems just okay. With the fourth donut you are turning somewhat green. The fifth donut makes you sick. Your friend, an economist, describes your experience as the principle of:
A)utility maximization.
B)irrationality in consumer behavior.
C)instant gratification.
D)differing tastes and preferences.
E)diminishing marginal utility.

Question

Quizplus · Accepted Answer

The principle being described in this scenario is the law of diminishing marginal utility, which states that as consumption of a good or service increases, the marginal utility or satisfaction derived from each additional unit decreases. This is evident in the scenario as the first two donuts provided a high level of satisfaction, but the satisfaction decreased with each subsequent donut until it made the person sick. Therefore, the best choice is E, because it accurately describes the principle being demonstrated.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation