Answer to Question #171913 in Microeconomics for nezar

Question

Sue’s Shoe Shop is having a sale on shoes. The first pair of shoes is full price, the second is 25% off, and the third is 50% off. Describe how this sale relates to individual demand and marginal utility.

Answer 1

This sale is related to Individual demand and marginal utility. The demand curve shows the willingness to pay for various quantities. Now the willingness to pay is the marginal utility that the individual gets from consuming additional unit. Law of diminishing marginal utility states that marginal utility goes on decreasing with consumption of every additional unit.

For first pair of shoes, the utility is nigh so that the individual is willing to pay the full amount. But for 2nd pair, the marginal utility of 2nd pair decreases so that the individual is willing to pay less price. for third pair, The individual is willing to pay still a lower price due to decrease in Marginal utility.

Hence successive discount is related to individual demand and marginal utility.