“Total utility is maximum where marginal utility is zero”. Explain fully.
“Total utility is maximum where marginal utility is zero”. Explain fully.
Or
With the help of graphical presentation, explain Marginal Utility and Total Utility.
Ans.
Total Utility (TU)
Total satisfaction obtained by a consumer by consuming given quantity of a particular commodity is called Total Utility. It is the sum total of the Marginal Utilities obtained from the consumption of successive units of a commodity. Mathematically, it is calculated as:
TU=MU1 +MU₂+…+MUn or Σ MU
For example, a consumer gets a satisfaction of 30, 20 and 15 utils from consuming 3 ice-creams, respectively. Then the Total Utility of the consumer is 30+20+15-65 utils.
Marginal Utility (MU)
The utility derived from the consumption of an additional unit of a commodity is termed as Marginal Utility. It may also be called as the utility obtained from the consuming of an additional unit. Mathematically, it is calculated as:
MUnth= TUn – TUn-1 or MU= △TU/△Q
Here,
MU = Marginal Utility
TUn = Total Utility from n units
TUn-1 = Total Utility from (n-1) units
△Q = Change in quantity
△TU = Change in Total Utility
For, example, a consumer gets a satisfaction of 30 units from consuming his first cup of ice-cream. After consuming his second cup, his Total Utility rises from 30 utils to 50 utils. Then, the Marginal Utility of the second cup is (50-30)=20 utils.
