Utility Maximizing Rule – Safeway Can Help

All consumers want to maximize utility on spending of next dollar, but sometimes we need help in calculating numbers.

Safeway and many other supermarkets recognize this basic consumer need to maximize utility and have developed ways to help.  Since utility is personal and is different from one person to another, Safeway included for each product price label not only the total cost of the item but also the calculated cost per unit weight, to help each consumer assess utility.

For example, recognizing the law of diminishing marginal utility, Safeway included cost per unit weight for the same product but packaged in different sizes by weight.  This way, each consumer can assess for themselves which package size maximizes utility (in terms of cost per weight) that best suit them.  For some consumer, the product utility diminishes significantly and hence demand a significant discount to purchase the larger package but others may choose to buy the larger package with relatively small discount.