Economics Marginal Utility Questions
The importance of marginal utility in pricing decisions lies in its ability to determine the value that consumers place on additional units of a product or service. By understanding how the marginal utility decreases as more units are consumed, businesses can set prices that align with the perceived value of the product. This helps in maximizing profits by finding the optimal price point where the marginal utility equals the marginal cost. Additionally, marginal utility analysis allows businesses to identify consumer preferences and make informed decisions regarding product differentiation, bundling, and pricing strategies.