Carvel advertises a football-shaped ice cream cake for $7; you can buy a second one for only $4.What do they know about consumer preferences?

Question

Quizplus · Accepted Answer

Carvel is using the concept of diminishing marginal utility to incentivize consumers to buy a second cake at a lower price. They know that consumers derive less satisfaction from consuming each additional cake, so they offer a lower price to counteract this. This suggests that consumers may be willing to buy a second cake, but only at a lower price point.

Carvel Advertises a Football-Shaped Ice Cream Cake for $7; You