Some restuarants offer " all-you-can eat" meals at a fixed price per person. how is this pratice related to diminishing marginal utility? What restrictions must the restaurant impose on the customer in order to ensure that its business is still profitable?
2006-08-13 22:21:25 · 3 answers · asked by jamie t 1 in Education & Reference ➔ Homework Help
This concept has got direct links with the concept of diminishing marginal utility . the restuarant people are very well aware of this concept.
picture this u are very hungry and u happen to see the ad and decide to go into this rest. u will order first qty and after having it u will crave for more but your utility for the second would definitely be less than the first one. this is going to continue till the time u will be in a position to equate the marginal utility of money with the marginal utility of the product.
it should fix the quantity (above) where customer is unable to equate the marginal utility of money with the MU of the product.
2006-08-14 03:37:30 · answer #1 · answered by Arps 2 · 1⤊ 0⤋
The customer can't be allowed to share food with people who haven't paid, and the customer must not be allowed to carry food out of the restaurant. The restaurant also has to charge a high enough price so that they average a profit once the average customer has eaten as much as he can.
Basically, every plate you eat is worth less, because you're getting fuller. Eventually, the next plate will be worth zero, (or negative money, you won't eat it even if someone pays you). That's marginal utility. When the marginal utility (value of the next plate) becomes zero, the customer will stop eating.
2006-08-13 22:29:22 · answer #2 · answered by 006 6 · 0⤊ 0⤋
No restrictions. Eventually the person will get full. The more you eat, the satisfaction of eating diminishes.
2006-08-13 22:25:04 · answer #3 · answered by Anonymous · 0⤊ 0⤋