GB 540 Unit 3 Discussion 1 One of the main principles behind mainstream, neoclassical economic theory is that individuals act to optimize their own utility. Utility is generally defined as a satisfaction (pleasure) that an individual derives from consuming or using a specific good or service. One of the most interesting areas in utility theory is the paradox of value. There is a paradox of value due to the fact that absolute necessities such as water and air are valued (priced) very cheaply, whereas other goods like diamond, which are not necessities, are highly valued and command the most outrageous prices. In order to understand the paradox of value, there is a need to distinguish total utility from marginal utility. The total satisfaction obtained from all units of a particular good or service consumed over a period of time is called total utility. An additional or incremental utility derived from consuming one more unit of a good or service is called marginal utility. Thus marginal utility is the change in the total utility that results from one unit change in consumption of a good or service within a given period of time. Using the Diamond-Water Paradox as a guide (refer to page 124 of the textbook) and two other goods of your choice, illustrate the paradox of value. Explain the roles total utility and marginal utility play to understand this paradox. Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help
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