Practise using utility tables and consumption contexts to explain diminishing marginal utility and the downward-sloping demand curve.
Many hotels offer an all-you-can-eat breakfast buffet. 80\% of hotel guests go to the breakfast buffet three times for food but only 10% visit five times.
With reference to hotel breakfasts, explain why the above information illustrates 'diminishing marginal utility'.
Knowledge 1, Application 1, Analysis 2
Quantitative skills assessed:
QS9: Interpret, apply and analyse information in written, graphical, tabular and numerical forms.
Knowledge
1 mark for understanding of 'diminishing marginal utility'
- Where an additional unit of consumption leads to a smaller increase in utility/ where the marginal utility decreases/total utility increases but at a slower rate (1)
Application
1 mark for reference to data
- 80% of hotel guests go to the buffet three times / Only 10\% visit five times (1)
Analysis
Up to 2 marks for analysis e.g.
- 90% of hotel guests are satiated/full after consuming the 4th bowl/plate of food (1) so do not consume the 5th bowl/plate (1)
- The last bowl/plate of food consumed increases total utility (1) but the gain in utility is smaller than for the last bowl (1)
(4)