February 22, 2017

Homework Help: Microeconomics (margin Utility) need clarification

Posted by David on Wednesday, October 15, 2008 at 6:50pm.

Someone was kind enough to help me with this question, but i was still confused on how they helped me with the first part of my question.

The original question was:

You go to an auction and set a maximum price of $100 you are willing to bid on an item. However, you are fortunate and purchase it for $50.

1) Does the lower price alter the marginal utility you originally placed on the item?

The answer that was given me for Number 1 was:

1) Under the most common utility functions, No. Price paid is independent of the marginal utility received.

I am not quite sure if i understand this answer, can someone help me understand it more. Thanks

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