Use the Law of Diminishing Marginal Utility to Explain Why

question 181

Essay

Use the law of diminishing marginal utility to explain why Domino's and Pizza Hut allow the purchase of a second pizza for only $4 when one pays full price (around $10)for the first pizza. Why not simply charge $7 a pizza instead?

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Definitions:

Overconfidence

The phenomenon where an individual's subjective confidence in their judgments is reliably greater than their objective accuracy.

Irrational Decisions

Choices made by individuals that contradict the best outcome from a rational point of view, often influenced by biases or lack of information.

Mental Accounting

The psychological process by which individuals classify, organize, and perceive their monetary resources and expenses.

Values

In economics, values refer to the importance or worth that is attached to goods or services, influencing their price and demand in the market.