Chapter 6, Problem 4P

To determine

Eileen’s utility from renting the movies online and from watching the first-run movies in a theatre.

Concept Introduction: Marginal Utility: It is the net addition to the total utility when an additional unit of good is being consumed.

  $\text{MU}={\text{TU}}_{\text{n}}-{\text{TU}}_{\text{n}-1}$

Law of Diminishing Marginal Utility: The law states that as we consume more and more of a unit, the successive utility from consuming additional units goes on falling. In other words, the marginal utility goes on falling as we consume more of a good.