Question

By the use of the concept of consumer surplus and marginal utility, explain how you will solve the water problem in your community if water is not metered.

Answer 1

Consumer surplus is based on the theory of marginal utility that benefits a consumer as a result of more unit of goods or services. The utility the goods or services provide vary from individuals to individual due to their preferences. Thus, in a scenario where water is not metered, consumers are likely to spend less due to the diminishing marginal utility they receive.