Consumers have a better chance of maximizing their utility when they have a variety of goods to choose from, the more goods and services the better. When consumers have a greater variety of goods and services to choose from, they have a better chance of selecting the best products to satisfy their needs and once.
When those goods and services are produced in greater quantities and are more abundant in the market, consumers can choose the optimal quantity of goods to purchase to maximize their utility.
It’s a lot like the cereal aisle in the grocery store, it’s one of the few products that has virtually an entire aisle to itself, there are so many different kinds of cereal that can be found in plentiful quantities (rice based cereals, wheat base cereals, hot cereals, cold cereals, cocoa cereals, fruity cereals, healthy cereals,…) with so many cereals to choose from, consumers have a greater chance of finding the one particular type of cereal that they’re looking for, and in the quantity they desire, and they can easily switch to another cereal if their wants changed.
If every product market has this kind of variety and abundance, consumers would have no problem meeting their needs and wants, all in all consumer choice means greater utility.
Defining Marginal Utility
Consumer choice is all about marginal utility, it is the satisfaction or utility gained for the consumption of each additional unit of a good or service. When making choices on what to buy and how much to buy in a market, consumers will compare the marginal utility gained from each unit of a good consumed to the marginal cost of consuming it. If the marginal utility of a good is greater than or equal to its marginal cost a consumer will decide to buy it, the moment that marginal cost becomes greater than marginal utility consumers will walk away without buying it.
It’s not like consumers sat there and do math and it’s more of a feeling or an intuition, if you’ve ever been in a store and picked up an item looked at the price tag and thought oh it’s totally worth it, you’ve weighed the goods marginal cost against its marginal utility and decided the utility you gain is greater than the cost you would have to pay to buy it. If you’ve ever picked up a good looked at the price tag and think “oh that’s too much” then you have weighed the marginal cost against the marginal utility and decided that the marginal cost is greater than marginal utility and therefore it isn’t worth buying.
