Suppose a consumer is purchasing Coke and pretzels in quantities such that she is achieving consumer equilibrium. Then the price of Coke decreases. The consumer will likely __________ her consumption of Coke and the marginal utility of Coke will __________ while the total utility from Coke will __________.

Question

Quizplus · Accepted Answer

When the price of Coke decreases, the consumer will likely increase her consumption of Coke to achieve a new consumer equilibrium. As she consumes more Coke, the marginal utility (additional satisfaction from consuming one more unit) of Coke will decrease due to the law of diminishing marginal utility. However, the total utility (overall satisfaction) from Coke will increase because she is consuming more of it.

Suppose a Consumer Is Purchasing Coke and Pretzels in Quantities