If I increase the amount of pizza that I serve why will you experience diminishing returns?
Why is the marginal cost of inputs more important than the average cost of inputs?
The increase in the amount of pizza beyond a certain point leads to the negative marginal utility. It means that the satisfaction derived from eating pizza becomes negative after eating certain number of pizza.
This is based on the concept of utility. Utility is an abstract concept. Utility is the satisfaction that an individual gains from consuming a given amount of goods or services in an economy. The amount of a person's total ...
This explains the relationship between Marginal cost of inputs and average cost