AB 224 Unit 4 discusssion ECONOMICS OF CONSUMER SATISFACTION

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ECONOMICS OF CONSUMER SATISFACTION

According to (Mankiw, 2014), consumer utility is a branch of micro-economics. Utility is that satisfaction that consumers derive from consumption of a good or service. Understanding whether the consumer’s utility increases or decreases would important in shaping consumption behavior for the individual. On the first day of being supplied with my favorite pizza for lunch and dinner my excitement would be the highest. As (Rosella, 2010), observes, the marginal utility derived from consumption of a particular good increases at an increasing rate on consumption of the first pizza, increases at decreasing rate as more and more pizza are consumed and it eventually declines sharply. This means that my utility would be highest on the first few days of consuming the pizza and it would continue to increase at a decreasing rate towards the tenth day as I consume more and more pizza. The utility would however sharply decline towards the thirtieth day of the month.

Supposing my national brand gasoline company informs me of free gasoline every day for a period of one year, my excitement would gain be very high on the first day then it would decrease as more and more days go by. The utility derived from consumption of gasoline would remain high on the tenth day though it would be decreasing as I continue to consume more and more gasoline. My excitement and utility would have declined and almost negative by the thirtieth day of gasoline consumption.

The two scenarios though similar in that they involve the utility derived from consumption of a good and service, they would be different in terms of the length of time the good or service is consumed. The longer the time, the more the decline in utility and excitement about consuming any good. They can also be considered to be different in terms of their elasticity. Pizza is more elastic as compared to gasoline which is less elastic as an individual can do without it, (Rosella, 2010).

References

Rosella A: (2010): Differentiated Networks: Equilibrium and Efficiency. Rand Journal of Economics, Vol.39, No.3, pp747-769.

Mankiw G, (2014): Principles of Microeconomics. South-Western College Publishers.




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