Consumers aim for ____________ because of ______________.

Question

Quizplus · Accepted Answer

Consumers aim for consumption smoothing because of diminishing marginal utility. Diminishing marginal utility implies that the additional satisfaction that a consumer derives from consuming an additional unit of a good decreases as the consumer already has a relatively large quantity of that good. Hence, consumers prefer to smooth out their consumption over time and avoid extreme fluctuations in their consumption levels to maintain a steady level of satisfaction.

Consumers Aim for ____________ Because of ______________

Consumers Aim for Because of __