Let MU_c denote the marginal utility that Pablo receives from a cup of coffee, and let p_c denote the price of a cup of coffee. We typically expect that as Pablo buys more coffee:

Question

Quizplus · Accepted Answer

According to the law of diminishing marginal utility, as Pablo buys more coffee, the marginal utility he derives from each additional cup decreases. Therefore, MU_c will fall. Meanwhile, assuming the price of coffee remains constant, the denominator of the fraction MU_c/p_c will not change. Thus, as the numerator falls and the denominator stays constant, the overall fraction MU_c/p_c will also fall.

Let MUc Denote the Marginal Utility That Pablo Receives from a Cup

Let MU_c Denote the Marginal Utility That Pablo Receives from a Cup