1.
Explain what you would rather maximize your total or marginal utility? How do you think you
would determine when to stop consuming if you were at an all you can eat buffet?
Solution
Total utility refers to the utility derived from consuming n number of units.
Marginal utility refers to the increase in utility per unit increase in consumption of a good.
Although marginal utility is used to determine the optimal amount to be consumed, the consumer
aims at maximizing total utility derived. At this point, the marginal utility is zero and further
consumption would lead to it being negative.
Thus, total utility needs to be maximized while deciding upon consumption.
In an all-you-can-eat buffet, optimal consumption can be determined at the point where the
consumer thinks and feels that eating more would bring him to a point of vomiting or upset
stomach. At this point total utility is maximized and marginal utility is minimum.