Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because
A)car buyers are irrational.
B)the total utility of less expensive cars is greater than that of luxury cars.
C)the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars.
D)luxury cars cost a lot more than non-luxury cars.

Question

Quizplus · Accepted Answer

This is because of the concept of marginal utility, where the additional satisfaction gained from each additional unit of a good decreases as you consume more of it. For luxury cars, the marginal utility per additional dollar spent is relatively low, whereas for less expensive cars, the marginal utility per additional dollar spent is higher. Therefore, more people opt to purchase the less expensive cars to maximize their utility.

Most People Would Prefer to Drive a Luxury Car That