Testing The Laws Of Diminishing Marginal Utility

TESTING THE LAWS OF DIMINISHING MARGINAL UTILITY

Veny Adilia Pusapsari

Academic Investigation

Sinarmas World Academy

November 2011

Abstract

The research question of this academic investigation is “How is the level of

satisfaction when you eat more candies?”

The outline of the methodology is to state our own hypothesis before eating the

candies. So basically you write down what is the level of your utility every time you

eat the candies. And then we do the experiment by eating the candy one by one

and write down the level of utility for each candy.

The final result that we got is that the more candy they eat, the lesser the level of

utility is. Even some for people, it extremely decreased that it reaches level of below

zero, which means that they are not happy at all.

Background Research

Economics may appear to be the study of complicated tables and charts, statistics

and numbers, but, more specifically, it is the study of what constitutes rational human

behavior in the endeavor to fulfill needs and wants.

As an individual, for example, you face the problem of having only limited resources

with which to fulfill your wants and needs, as a result, you must make certain choices

with your money. You'll probably spend part of your money on rent, electricity and

food. Then you might use the rest to go to the movies and/or buy a new pair of

jeans. Economists are interested in the choices you make, and inquire into why, for

instance, you might choose to spend your money on a new DVD player instead of

replacing your old TV. They would want to know whether you would still buy a

carton of cigarettes if prices increased by $2 per pack. The underlying essence of

economics is trying to understand how both individuals and nations behave in

response to certain material constraints. ("Economics Basics: Introduction.")

In short, we can say that people will always have limited resources and needs and

wants. the problem is sometime we have to make a decision from many options.

That decision may not be satisfying but it is a must, for example the needs to eat.

This kind of decision always makes people to want to have more resources like

money. Therefore, towards this kind of resources we will never feel that we have

enough. This is why we need to learn economic and this is why this research is

conducted.

In economics utility is a measure of satisfaction, referring to the total satisfaction

received by a consumer from consuming a good or service. Given this measure, one

may speak meaningfully of increasing or decreasing utility, and thereby explain

economic behavior in terms of attempts to increase one's utility. Utility is often

modeled to be affected by consumption of various goods and services, possession

of wealth and spending of leisure time ("Utility").

Utility are divided into 2, which are marginal and total utility. Marginal utility is the

additional satisfaction or benefit (utility) that a consumer derives from buying an

additional unit of a commodity or service ("Marginal Utility”). Marginal utility, thus,

can also be described as difference between total utility derived from one level of

consumption and total utility derived from another level of consumption.

Meanwhile, total utility is the total satisfaction obtained from all units of a particular

commodity consumed over a period of time. Summing up total utility is the amount

of satisfaction (utility) obtained from consuming a particular quantity of a good or

service within a given time period. It is the sum of marginal utilities of each

successive unit of consumption ("Total Utility (TU) and Marginal Utility (MU) -

Difference”).

By measuring the level the utility we can see how rational someone’s decision is. The

rational economics viewpoint assumes people make rational thought out decisions

based on their own calculated best interests ("Rational Vs Irrational Economics”). In

relations between making decision with limited resources and the level of utility, we

can conclude that people wants to have more to be satisfied.

Methodology

The technique that we use to take the data is called Non-Random Sample

technique. A non-random sample technique means that the people involved in

this experiment is particularly chosen. In this case, people in my table are the

ones conducting the experiment and then we share our data with the whole

grade.

We use secondary resources while we are doing the research this academic

investigation. The purpose of using it is to help our research to be much more

detailed, objective and informative.

To start the experiment the teacher gave us a few candies but before we eat

them, we have to write our own hypothesis and predict what will happen.

Then, we eat the candy one by one and write down the level of satisfaction

for each candy. The experiment is not only done in my class but also the

whole grade. So after we have collected our data, we have to share it with the

other classes using Google Docs.

We are using this technique because it is easy to conduct and doesn’t take a

lot of time because all we need to do is just eat the candies and write down

our level of satisfaction.

But there are disadvantages when we are using this technique; it is unable to

provide a proper overview, we also only have small sampling size and this

technique also building a bias. The other disadvantages of using this technique

is the shared data is not clear because some of them are presented in graphs

that is hard to read.

Presentation and Analysis of Data

These are the datas that I used for this experiment from the whole grade 9 students:

From all these data that I have from all the students from grade 9 that involved in

this experiment, we can see clearly a really high significant level of utility when they

eat more candies. Their level of utility are going down as they eat more candies. Even

though some of them are anomalies because instead of going down, their level of

utility is going up or even doesn’t change at all.

Conclusion

After 37 datas that I got, most of their level of utility are going down when

they eat more candies. From the data that I have, 23 students’s that are

involved in this experiment, their level of utility are going down. The rest of

them are going up or doesn’t change at all.

Sally

0

2

4

6

8

Candy 1 Candy 2 Candy 3 Candy 4 Candy 5

Appendix (3 Candies)

Purcell

Amount of Candy Level of Utility

1 10

2 10

3 8


Christy


1 10

2 8

3 3

4 -2

Viana


1 10

2 9

3 9

4 8

Caroline


1 10

2 9

3 8

4 -3

Nathalie


1 -10

2 -10

3 -10

4 -10

Brandon


1 5

2 6

3 6

4 8

James


1 7


2 8

3 9

4 10


Gary


1 9

2 8

3 8

4 10

5 10

Putri


1 6

2 6

3 7

4 8

5 7

Joey


1 4

2 6

3 8

4 9

5 10

Sean


1 4

2 6

3 6

4 7

5 7

Cynthia


1 10

2 8

3 8

4 9

5 9

Woo Sik


1 10

2 9

3 9

4 8

5 7

Nabilla


1 8

2 8

3 8

4 8

5 8

Alia


1 8

2 8

3 6

4 5

5 3

Kim


1 10

2 10

3 10

4 10

5 9

Nathan


1 9

2 8

3 8

4 7

5 7

Adric


1 10

2 9

3 8

4 7

5 7

Won


1 10

2 9

3 7

4 6

5 4

Giovani


1 9

2 9

3 6

4 5

5 5

Satori


1 6

2 4

3 5

4 6

5 6

Andrew


1 8

2 6

3 5

4 5

5 5

Kelvin


1 8

2 8

3 8

4 3

5 0

Reyhan


1 6

2 5

3 4

4 3

5 2

Sally


1 8

2 6

3 5

4 2

5 0

Wi Sung


1 10

2 6

3 6

4 5

5 6


Veny


1 9

2 6

3 5

4 4


5 3

6 2

Monica


1 9

2 6

3 5

4 4

5 3

6 2

Elena


1 9

2 6

3 5

4 4

5 3

6 2

Jeremy


1 10

2 10

3 8

4 8

5 8

6 6

Michael


1 8

2 10

3 10

4 10

5 10

6 9

Andre


1 10

2 10

3 10

4 10

5 8


6 8

Geun Myo


1 6

2 6

3 6

4 7

5 7

6 9

William


1 10

2 10

3 10

4 10

5 10

6 10

Ardy


1 10


2 10

3 10

4 10

5 10

6 10

Bonnie


1 6

2 8

3 9

4 4

5 2

6 1

Ji Yeon


1 7

2 5

3 3

4 2

5 1

6 1

Work Cited:

- "Economics Basics: Introduction." Investopedia.com - Your Source For Investing

Education. Web. 02 Dec. 2011. <http://www.investopedia.com/university/

economics/default.asp>.

- "Utility." Wikipedia, the Free Encyclopedia. Web. 02 Dec. 2011. <http://

en.wikipedia.org/wiki/Utility>.

- "Rational Vs Irrational Economics: “I Don’t like Reality”." The Irreverent Buddhist.

Web. 02 Dec. 2011. <http://freedomforall.net/rational-vs-irrational-economics-i-

dont-like-reality/>.

- "Marginal Utility (economics) -- Britannica Online Encyclopedia." Encyclopedia -

Britannica Online Encyclopedia. Web. 02 Dec. 2011. <http://www.britannica.com/

EBchecked/topic/364750/marginal-utility>.

- "Total Utility (TU) and Marginal Utility (MU) - Difference - Definition and

Explanation - Formula - Example - Scedule/Table - Curve/Diagram -

Economicsconcepts.com." Learn Business and Managerial Economics Online -

Economics Concepts and Articles - Micro and Macro Economics - Development

and Planning Economics - Economicsconcepts.com. Web. 02 Dec. 2011. <http://

economicsconcepts.com/total_utility_and_marginal_utility.htm>.

http://www.investopedia.com/university/economics/default.asp




http://en.wikipedia.org/wiki/Utility




http://freedomforall.net/rational-vs-irrational-economics-i-dont-like-reality/




http://www.britannica.com/EBchecked/topic/364750/marginal-utility




http://economicsconcepts.com/total_utility_and_marginal_utility.htm




Testing The Laws Of Diminishing Marginal Utility

Documents

Transcript of Testing The Laws Of Diminishing Marginal Utility