Question

As you start consuming potato chips, your marginal utility is very high, but begins to fall slowly until you've eaten 10 chips. after eating 10 chips, marginal utility decreases even faster with each additional chip. marginal utility continues to decline but remains positive until you've eaten 49 chips. the 50th chip does not give you any additional utility. after 50 chips, your marginal utility is negative.

Answer 1

Answer:

The law of diminishing marginal utility.

Explanation:

Marginal utility is basically satisfaction derived from consuming an extra unit of product. According to the law of diminishing marginal utility as consumption increases the marginal utility derived from each additional unit decreases.

So when we consume 1 chips marginal utility is high, then as more is consumed we still get some positive utility out of it but at a decreasing rate now. At some point this utility equals zero after which it starts declining as more chips are consumed because it is not providing any satisfaction now. Therefore the chips should be consumed only up to the point where the marginal utility equal zero.