Utility of Oranges: Explained Through Table - Essay Sample

Introduction

In economics, each commodity normally possesses utility for the customers or consumers. Whenever a consumer is buying oranges, he or she usually receives them in the form of units—for example, 1, 2, 3, 4, 5. A clear illustration in the form of a table can be explained as follows.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

From the above table, the two oranges have more utility that one, and four have a more utility than three. In most cases, the units of commodities that consumers choose are usually in descending order of their utilities. For example, in our case, the first orange gives the consumer the highest satisfaction as it is the best and has a utility of 20. Then the second orange has less utility as compared to the first, as it has 15 utils. Thus, the total utility is utilities sum, which is attained from the commodity of different units. For instance, from the above table, the oranges total utility is 45 utils, and it is calculated as; (10 + 15 + 20).

Alternatively, “marginal utility” is an addition toward the sum of value as a result of an additional commodity item (Al-Khayyat, 2018). It’s a loss of utility whenever one unit, which is less, is consumed. Thirty-five utils are the total value in the first two oranges. Then, if a consumer decides to consume the third orange, the total utility will be 45 utils. Therefore, ten utils are the marginal utility, and its calculation is (45-35).

Can Marginal Utility be Negative?

Yes, in some cases, this can happen, and it occurs whenever a consumer consumes an additional item or commodity, which results in a decrease in the total utility. In real life, this can be explained using the following example. Antibiotics help in killing harmful bacteria if the patient uses the correct dose. However, in case he takes too much of it, it can harm this patient (Castro & Araujo, 2019).

Also, a negative marginal utility can occur when an extra unit of a commodity is consumed, and the result worsens. For example, when a consumer consumes his first hamburger because he was hungry, the marginal utility happens to be high. Then, in case he consumes the second and third hamburger, they will have a lesser utility. Each additional hamburger unit provides a less utility or pleasure to the consumer; thus, it's referred to as diminishing marginal utility. In some cases, when a consumer is full and consumes an extra unit of a commodity, his condition worsens, and he may become sick. Thus, the last unit of hamburger that is negatively consumed results.

Illustration of Diamond-Water Paradox

Adam stated that people could not live without water, but they can live with no diamond. However, diamonds are pound; thus, they are precious than water. Water is important to all human activities, and therefore, its price is very low. In the case of diamonds, they are not that important in people's lives, but they are costly. Thus, a value obtained from water is higher than that of a diamond (Al-Khayyat, 2018).

Water as a good provides a high level of satisfaction to many individuals, and total utility is also high, but the lower rate in marginal utility. Diamond does not provide much satisfaction to consumers, as in the case of water.

Evaluation of the Law

According to economists, this law states, items become less valuable when a consumer consumes more of them. When a consumer consumes a particular item, his satisfaction, which is derived from that item, reduces as he continues consuming more and more of that particular product. For example, a person might buy a certain flavor of chocolate for a period, still, after sometimes, he may choose a different chocolate flavor or even buy less because his satisfaction level is diminishing.

According to Alfred Marshall, who was an economist, stated that, when a consumer takes more and more units of an item, each unit provides utility in a diminishing rate if all things remain constant. But in the case of total utility, it highly increases. For example, a visitor in a desert area may drink his first bottle of cold water to satisfy his thirst. Thus, the satisfaction of his thirst is its main purpose in taking water. In the second bottle, the consumer might decide to store it for later use or even use it for bathing his body. In case he saves it, the economists refer to this as the law as the concept of savings versus consumption (Castro & Araujo, 2019).

Items With No Connection to this Law

There are some of the commodities where the law does not apply. For example, habitual goods, i.e., consumption of alcohol, cigarettes, as well as drugs, have no relation to the law. Also, in durable and valuable items, the law is not applicable. For example, valuable and durable goods like vehicles, gold, and buildings (Amacher & Pate, 2019). Also, products like refrigerators and Televisions do not apply to this particular law. I think that these kinds of goods do not follow this law as their consumption or usage is not in a continuous nature as compared to the case of consumable commodities like apples and oranges.

Explanation of Diamond-Water Paradox

In most places, water is always scarce, and this makes its marginal utility to be very low. The law works heavily on the water by driving or decreasing the marginal utility at a lower level close to zero (Amacher & Pate, 2019). On the other hand, the economists state that the diamonds are less plentiful as compared to the case of the water. Its marginal utility is normally very higher as compared to that of other commodities.

Price is a determinant of marginal utility. For example, the water price is usually low simply because its utility is down. The price of a diamond is usually high, as its marginal utility is also high. Thus, most of the consumers will be willing to pay goods that generate more satisfaction at a demand price.

References

Al-Khayyat, F. N. M. T. (2018). Surface Modification Of Titanium Implants By Grit-blasting With Novel Bioactive Glasses (Doctoral dissertation, Queen Mary University of London).

Amacher, R. & Pate, J. (2019). Principles of microeconomics (2nd ed).

Castro, L., & Araujo, A. (2019). Marginal Utility & its Diminishing Methods. International Journal of Tax Economics and Management.