Kathy is attending school away from home, and returns home to visit her family and friends at least once a year. Kathy’s annual demand curve for plane tickets is provided in the accompanying graph. a. First, determine how much benefit Kathy receives from each trip home. Kathy receives
of marginal benefit from the second trip. Kathy receives
of marginal benefit from the fourth trip. Kathy receives $ of marginal benefit from the fith trip.
The Correct Answer and Explanation is:
To answer this question, we need to extract the marginal benefit Kathy receives from each trip, using the demand curve shown in the graph.
Step-by-Step Analysis:
From the graph:
- The demand curve shows the maximum price Kathy is willing to pay for each successive trip home. This price reflects her marginal benefit from that specific trip.
Let’s look at the approximate values from the graph:
| Trip Number (Quantity) | Price (Marginal Benefit) |
|---|---|
| 1st trip | $600 |
| 2nd trip | $500 |
| 3rd trip | $400 |
| 4th trip | $300 |
| 5th trip | $200 |
| 6th trip | $100 |
Answers:
- Marginal benefit from the first trip: $600
- Marginal benefit from the second trip: $500
- Marginal benefit from the third trip: $400
- Marginal benefit from the fourth trip: $300
- Marginal benefit from the fifth trip: $200
Explanation:
Kathy’s demand curve for plane tickets reveals how much value—or marginal benefit—she receives from each additional trip home. A marginal benefit refers to the additional satisfaction or utility a person gains from consuming one more unit of a good or service. In this context, it’s the maximum price Kathy is willing to pay for each additional round-trip ticket.
Demand curves generally slope downward, reflecting the law of diminishing marginal utility. This means that the first trip home brings Kathy the most satisfaction, and each additional trip provides slightly less value than the previous one. From the graph, we can see the first ticket is valued at $600, the second at $500, the third at $400, the fourth at $300, and the fifth at $200.
This decreasing pattern suggests that Kathy places the highest value on her initial visit home—likely due to emotional and social needs being strongest when she hasn’t seen her family for a long time. As she visits more frequently, each additional trip is still valued, but slightly less, reflecting a decline in urgency or novelty.
Understanding marginal benefit is critical in economics because it guides consumer decision-making. Rational consumers compare the marginal benefit of an action with its marginal cost. Kathy will continue to buy tickets home until the marginal benefit of another trip equals the cost of the ticket. If plane tickets cost $300, for example, she would likely take three trips: the first three bring benefits above or equal to $300, but the fourth does not.
This concept helps businesses price products and understand consumer behavior, and it helps consumers like Kathy make informed, efficient choices.
