We’re Number One and That’s not Bad

The concept so explained is

marginal utility per dollar i.e. (MU/P)
 The concepts used…

1. Marginal utility- The So, utility maximization

benefit gained from is attained when,
consuming one MRS = or,
additional unit of a
product or services.
The two possibilities-
2. Marginal Rate of
Substitution- The
amount of good that a
consumer is willing to
sacrifice in exchange for
some amount of another
good.
 The Case

Table showing top-10

• In 1990, Buick advertised
automobile lines (medium-sized
extensively, that they were only models) along with their list
price.
American car line in the top-10
1. Lexus – 6. Honda -
list.
$ 35,000 $14,500
• George Will, a columnist of The 2. Mercedes- 7. Nissan –
San Diego Tribune, belittled Benz – $ 18,000
$ 48,000
Buick by saying, “Buick is
3. Toyota – 8. Acura –
bragging about only being fifth”. $ 21,000 $ 26,000
• Many American firms were not 4. Infinity – 9. BMW –
producing quality products, but $ 38,000 $ 37,000
for Buick “Number Five” may be 5. Buick – 10. Mazda –
$ 15,000 $ 25,000
great.
 The Case continue…

• Buick was priced lower than all other cars, except

Honda
• If approach in theory of Consumer Behavior, is
considered-

• And ranking was based on the, quality per dollar of

cost, Buick could easily have been ranked higher
than fifth.
 The concept…

Utility maximization is attained when,

MRS = or,

The two possibilities-

Thank You