Consumer A has higher income than consumer B but they have identical preferences and pay same prices for goods. It is mentioned that marginal utility is lower for A than B and total utility is higher for A than B. I didn't understand how marginal utility is lower for A? Can anyone please elaborate on this? Thanks!
Hi Bharti As they have identical preferences and pay the same prices, consumer A and consumer B will get the same goods, the same total utility and the same marginal utility if they have the same income. However consumer A has more income and so consumes more goods (we have assumed that all goods are normal here). Therefore consumer A has higher total utility. As marginal utility decreases as consumption increases, consumer A also has lower marginal utility. Dave
