Despite the fact that water is necessary to sustain life, it is less expensive than soft drinks. Economic theory suggests that this is so because

Question

Quizplus · Accepted Answer

According to marginal utility theory, as one consumes more of a good, the additional satisfaction derived from each additional unit of the good decreases. This means that the marginal utility per dollar spent on water is lower than that of soft drinks, even though the total utility of water consumption may be higher. Therefore, the market equilibrium price of water is lower than that of soft drinks. There is no evidence of a conspiracy or irrational behavior among consumers or sellers in this case.

Despite the Fact That Water Is Necessary to Sustain Life