Question

At Nice Price for the Ice, an ice cream parlor, customers routinely buy a scoop of ice cream for $3. If consumers purchase one scoop of ice cream at $3, why don’t they keep buying more and more scoops for $3 until the store sells out? Group of answer choices

Answer 1

Answer:

At some point, customers do not value an additional scoop at $3, so they will not pay $3 for a scoop after they reach that point.

Explanation:

The reason is that the law of diminishing marginal utility says that the increase in the consumption of a commodity decreases the utility that is derived from commodity consumption with the increase in every single unit of commodity. So this means that the utility is the reason why people consume a commodity. If the person has a high utility for the icecream then he will buy that commodity. Now the utility decreases and the person don't want the icecream because the utility for the second icecream is lower. So he will not pay $3 for an additional icecream at this point.