Christine has purchased five bananas and is considering the purchase of a sixth. It is likely she will purchase the sixth banana
if ______________ a. the marginal value she gets from the sixth banana is lower than its price.
b. the marginal benefit of the sixth banana exceeds its price.
c. the average value of the sixth bananas exceeds the price.
d. the total personal value of six bananas exceeds the total expenditure to purchase six bananas.
b. the marginal benefit of the sixth banana exceeds its price.
Explanation:
Consumer consumes a commodity only until: that commodity consumption yields him/ her more or at least equal satisfaction than the - dissatisfaction from loosing money (price) spent at that commodity.
Marginal Benefit is in terms of Marginal Utility i.e Additional Satisfaction that consumer gains from consuming an additional unit of a commodity.
So, Christine will purchase 6th Banana only if additional satisfaction from that additional banana's consumption > dissatisfaction owing to price cost paid for it.
If Marginal Value < Price, its satisfactory loss making for her & she will rather reduce banana consumption. Average & Total Values are not apt tools to analyse the case.
