If the MU per dollar spent on wings is greater than the MU per dollar spent on pizza, JP will spend that dollar on wings because it adds more to his TU than if he spent it on pizza, i.e., he’ll buy more wings and less pizza. Suppose that JP was consuming so that his MUp/Pp > MUw/Pw. Consuming more pizza will ↑ his MUp and consuming fewer wings will decrease his MUw. Remember, we have diminishing MU so more of a good means lower MU, and at lower quantities the MU is higher. JP should keep consuming more pizza and fewer wings until his MUp/Pp = MUw/Pw
where he will then be maximizing his TU.
I don't understand why more of a good decreases MU since in the example, it states that eating more pizza increases MU. Can someone please clarify this part for me? Thanks.
MU = marginal utility
Pp = Price per pizza
Pw = Price per wing
MUp = marginal utility for pizza
MUw = marginal utility for wings
MU in consumption is (almost always) postive but declining. Make a graph, put MUz on the y-axis, put consumption of good z on the x-axis. You should graph a downward sloping relationship, but MU is always positive. That is, each additional unit (bite) of good z adds to total utility, but less than the previous bite.
I hope this helps, if not, repost.
CONSUMING MORE OF ONE GOOD DECREASE MU BECAUSE THE ADDIONAL SATISFACTION YOU GET DECREASE FROM CONSUMING ONE GOOD.
THANKS.
In the context of the given example, the statement that "more of a good means lower MU" refers to the concept of diminishing marginal utility. Diminishing marginal utility states that as you consume more of a good, the additional satisfaction or utility you derive from each additional unit of that good tends to decrease.
When it is mentioned that consuming more pizza increases MU, it means that the additional pizza provides some level of satisfaction or utility. However, this concept assumes that the consumption is held constant for the other good, in this case, wings. As you consume more and more pizza, the marginal utility you derive from each additional slice of pizza will eventually start to diminish. This means that the overall satisfaction or utility gain from each additional slice of pizza will become smaller and smaller.
On the other hand, consuming fewer wings will decrease the MUw (marginal utility of wings). This means that as JP consumes fewer wings, the marginal utility derived from each wing will increase, making each additional wing more satisfying or adding more utility.
The idea behind maximizing total utility is to strike a balance between the marginal utility per dollar spent on pizza (MUp/Pp) and the marginal utility per dollar spent on wings (MUw/Pw). When MUp/Pp is equal to MUw/Pw, it implies that the additional satisfaction or utility gained from the last dollar spent on pizza is equal to the additional satisfaction or utility gained from the last dollar spent on wings. At this point, JP is maximizing his total utility because any further reallocation of the dollar between pizza and wings would not result in a greater increase in total utility.
So, to summarize, the statement that "more of a good means lower MU" relates to the concept of diminishing marginal utility. While consuming more pizza initially increases the marginal utility derived from each additional slice, it eventually starts to diminish. The goal is to find the point where the marginal utility per dollar spent on each good is equal, allowing for the maximization of total utility.