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Diminishing Marginal Utility
November 16, 2009 Flotsam and Jetsam

Not for this guy!

According to the co-worker, Ronnie Kaplan, the terms of this “low four figure” bet are simple: Scharoff “must eat sausage pizza for every meal during the month of October. The pizza must contain crust, sausage and cheese. All toppings, with the exception of lettuce on Taco Pizzas — yes, he loves them — and arugula and prosciutto — he has no idea what either of these are — must be cooked into the pizza. He cannot have dessert, chips or side dishes of any kind. No salads, no cereals, no slaw. Any significant caloric intake must be pizza.”

HT to a student of mine. We usually teach in our intro economics classes that each additional unit of consumption brings us less satisfaction than prior units. So, is this an example that violates it? Perhaps. But it would seem to me that for our pizza-lover each slice he downs is one slice closer to receiving a large cash reward. That he does not consume all this pizza without the cash might tell you more about whether additional slices provide him with less satisfaction.

Quiz for our students and interested readers: Suppose it is true that every single slice of pizza brings our friend the same amount of satisfaction as every other. Why are you virtually assured that diminishing marginal utility sets in ever for this fellow? (think opportunity cost)

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