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If you just finished running a marathon in the Florida summer, explain why you would pay a higher price for first bottle of Gatorade you consume then the second or third bottle of Gatorade. At what point do you stop consuming Gatorade even if they were offered for free?

User Andol
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ummmm because that's when there's a higher demand for it and not enough supply to meet demand
User Milan Velebit
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Microeconomic theory explains that the consumption of goods and services occurs because these products have a utility for consumers. This utility varies for each person and according to the situation. For example, if a person has just run a marathon, a bottle of gatorade is of great use to that person. A second bottle still has good utility, but as more bottles are consumed, the utility is diminishing for the consumer as he or she is getting more and more satisfied. There will be a time when an extra bottle will not be of any use to the marathon runner because he or she is no longer thirsty and has consumed everything he or she needed. Therefore, microeconomic theory explains that utility is a decreasing parameter that directly influences consumer demand. At some point, the consumer will have no further use and will not buy the product.

User Atgrubb
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