Oct 24 2007

SAS Economists Podcast #4: There can’t be too much of a good thing… can there?

Published by at 9:54 am under Utility,Utility maximization

by Helen Chu and Angel Liu

How do brownies relate to economics? First, most people can agree that brownies are, in general, a “good thing” because, well, they’re yummy. And because they are commonly perceived as a “good thing”, we have chosen them to be the subject in our exploration of the law of DIMINISHING MARGINAL UTILITY. How can such a “good thing” transform into something revolting in less than ten minutes? Take a look at the results below and listen to our podcast – you’ll see.

Marginal Utility

Marginal Utility

Table 1: Marginal Utility (utils) of Each Brownie for 4 Volunteers

For each volunteer, the marginal utility of each brownie they consumed had decreased, or diminished, evident through the negative slopes of each MU line, but due to the subjectivity of utility, some slopes are steeper than others.

Total Utility

Total Utility

Table 2: Total Utility (utils) of Brownies for 4 Volunteers

For each volunteer, the total utility after each brownie first increased at a decreasing speed, reached a maximum, then decreased at an increasing speed, evident through the upside-down U shapes, or negative parabolas, of the graphs. The difference in the shapes again illustrates the concept of the subjectivity of utility.

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

7 responses so far

7 Responses to “SAS Economists Podcast #4: There can’t be too much of a good thing… can there?”

  1. Margaret Liuon 25 Oct 2007 at 8:08 pm

    Aww, why didn't you two find me so I could volunteer for this???

    Haha, yay for elevator music.

    Good job with the podcast and the graphs were really something extra. The podcast audio was really clear, well prepared, smooth, and THOROUGH.

  2. howardlinon 26 Oct 2007 at 7:41 am

    This is very interesting. You showed the law of DIMINISHING MARGINAL UTILITY with live example. Our topic is about piratcy and price elasiticity.

  3. julie.linon 27 Oct 2007 at 8:11 pm

    ur podcast is really well done you've explained everything so clearly i wish this came out before we learned about it so i wouldnt have to read it.. haha anyway, you gave me a brownie and the first brownie was really a high 10 🙂

    the interviews were funny too which kept me interested to finish the whole 5 minutes. good job.

  4. Dana Yeonon 28 Oct 2007 at 10:50 pm

    Your podcast reminded me of a MTV program that aired a few years ago. Called, "I Bet You Will," the hosts of this show asked random passerbys to do the most horrific things (ex: eat slugs)to emphasize on how people will do anything for money. Even though your survey lacked the "money component" as well as the "horrifying component," I thought they were similar as both surveys highlighted how even though most people willingly volunteered to execute certain actions they thought would bring pleasure, they eventually had to stop as it brought them diminishing marginal utility after a certain point. Nice job on your podcast by the way.

  5. Michael Dailyon 29 Oct 2007 at 1:59 am

    I thought this podcast was pretty effective because of the experiment, but I'm positive I could eat more than eight brownies. Anyways, I felt as though the law of diminishing marginal utility was stressed even more with this podcast and I understand it better after listening to it.

  6. kevinyehon 29 Oct 2007 at 4:24 am

    This was a really well done podcast. I do have one question though. The quantification of your utility seems so subjective. However, they still really show the law of diminishing marginal utility really well. Great job

  7. Cassy Changon 29 Oct 2007 at 8:26 pm

    haha, just like Ms. Close's example of the chicken pie…after the fourth one, you'd have to pay the person to eat another one.