All the units of a commodity consumed are of reasonable size. They are neither too big nor too small. On the basis of the table Total utility and Marginal Utility curves can be derived with the following diagram.

Whereas Marginal utility is the addition to the total utility derived by consuming an extra or additional unit of a commodity. In other words, marginal utility derived from the consumption of an additional or extra unit of a commodity. In the diagram, TU is the total utility curve and MU is the marginal utility curve. As the consumer consumes the first unit of commodity, s/he obtains 10 utils of utility.

• Suppose that Jean normally orders three tacos, but on seeing that their price has gone up, decides to buy only two.
• But as given in the question that the ratio of marginal utility to price in case of X is higher than that in case of Y,i.e….
• All units of a commodity are consumed in quick succession without any lapse of time.
• There is an inverse relationship between MU and stock of the commodity i.e. as the stock of the commodity consumed increases, MU goes on diminishing.
• When total utility falls, marginal utility becomes negative.

The marginal utility can be defined as an extra utility drawn from an extra unit of a commodity. Hence, it is the change in total utility while consuming one more unit of commodity. In other words, it is the ratio of change in total utility with the change in units of a commodity .

This process remains upto point E and MU decreases. With the help of the above schedule the relationship between MU and TU can be represented in the diagram.

When the consumer consumes 2nd unit of goods, TU increases to 18 utils from 10 utils and MU decreases to 8 utils. By adding MUs TU is obtained. Accordingly, when the consumer consumes the 6th unit of goods, MU decreases to zero where TU becomes maximum . After the 6th unit consumption of goods, MU is negative (-2) and due to negative MU, total utility declines to 28 utils from 30 utils. Thus, the consumer gets maximum satisfaction when MU is zero and that point is known as the point of saturation.

A commodity can satisfy the want of more than one person, it can also be put to several uses. For example, electricity can be used to serve many purposes and for many people at some point of time. Utility is the capacity of a commodity to satisfy human wants, whereas usefulness indicates value in use of the commodity. For example, milk has both utility as well as usefulness to a consumer, while liquor has utility only to an addict, but has no usefulness. There is an inverse relationship between MU and stock of the commodity i.e. as the stock of the commodity consumed increases, MU goes on diminishing.

There is a direct relationship between total utility and marginal utility. Total utility is always based on marginal utility as a total utility is the summation of marginal utilities. The relationship between TU and MU can be explained with help of the following table.

Point of satiety means ………………. (a) TU is rising and MU is falling (b) TU is falling and MU is negative

However, this violates the assumption of rationality. When Mu becomes negative, total utility starts diminishing. This is the area of dissatisfaction. The questions involved in Balbharati Solutions are important questions that can be asked in the final exam.

The detailed, step-by-step solutions will help you understand the concepts better and clear your confusions, if any. Diminishing marginal rate of substitution ensures that the indifference curve is convex to the origin. Only then the point of tangency becomes the point of consumer’s equilibrium. As we know, slope of budget line is Px (i.e. price ratio of two goods) with the increase in income. Remains constant and only ability to purchase quantities of both commodity X and commodity Y increases.

Relationship Between Total Utility (TU) and Marginal Utility (MU):

As, we know quantity of one commodity increases, its marginal rate of substitution falls because of law of diminishing marginal utility. Marginal rate of substitution is a slope of Indifference curve and whenever slope decreases it makes the curve convex to the point of origin. In the above diagram, units of commodity x are measured on X-axis and marginal utility is measured on Y-axis. Various points of MU are plotted on the graph as per the given schedule. When the locus of all the points is joined, the MU curve is derived. MU curve slopes downwards from left to right which shows that MU goes on diminishing with every successive increase in the consumption of a commodity.

By connecting the tops of these rectangles with a smooth line, we get the TU curve that peaks at point Q and then slowly declines. To draw the MU curve, we take marginal utility from column of the table. The MU curve is represented by the increment in total utility shown as the shaded blocks in the figure. When total utility increases marginal utility is negative. Higher income means an increase in a consumer’s ability to purchase increased quantity of both the goods, represented by a rightward shift of the budget line. The new budget line will form a tangent to a higher indifference curve.

Explain the relationship between Total utility and Marginal utility. – Economics

As we consume more units of a commodity, our total utility from its consumption keeps falling. The marginal rate of substitution is constant as you move along an indifference curve. The TU curve begins from the origin, increases at a decreasing rate, reaches a maximum, and then starts falling. TU stops growing in this phase, this point is known as the point of safety.

h Economics Chapter 2 (Utility Analysis) Maharashtra Board – Free Solution

In the law of diminishing marginal utility, Alfred Marshall assumes that the marginal utility of money ______. A consumer’s equilibrium will shift to a higher indifference curve with an increase in consumer’s income. In the given diagram X’ axis indicates units of commodity and ‘Y’ axis measures TU & MU. MU curve slopes downward whereas; TU curve goes upward. As total utility increases at a decreasing rate, then marginal utility decreases. In spite of the criticisms, the law of diminishing marginal utility is a very popular and important law in Economics because of its universal application.

When the consumer buys apples he re­ceives them in units, 1, 2, 3, 4 etc., as shown in Table 1. To begin with, 2 apples have more utility than when mu is falling tu is 1; 3 more utility than 2, and 4 more than 3. The units of apples which the consumer chooses are in a descending order of their utilities.

Balbharati textbook solutions can be a core help for self-study and acts as a perfect self-help guidance for students. The relation between total and marginal utility is explained with the help of Table 1. It is the representation of negative utility and total utility declines. At 7th unit MU curve is below x-axis as in figure and TU curve declines from point ‘F’ to ‘G’ as in figure .

It is a psychological concept. Utility differs from person to person. This is due to differences in taste, preferences, likes, dislikes, nature, habits, profession, etc.

Suppose that Jean normally orders three tacos, but on seeing that their price has gone up, decides to buy only two. The law is restricted to the satisfaction of a single want at a point of time. However, in reality, a man has to satisfy many wants at a point of time. The law assumes that utility can be expressed cardinally so it can be added, compared and presented through a schedule. In reality, cardinal measurement of utility is not possible because utility is a psychological concept.

NCERT Solutions for Class 12 Micro Economics Consumer Equilibrium

When TU is maximum, MU is zero. It is referred to as the saturation point. It indicates that units of the good are consumed till the saturation point. I hope its helpful…….

When MU becomes zero, the MU curve intercepts the X-axis. Further consumption of a commodity brings disutility which is shown by the shaded portion in the diagram. Total utility is the sum of all utilities derived by a consumer form all units of commodity consumed by him.

Two IC’s cannot intersect each other. This property is proved by Contradict Method. First we assume that they intersect each other and then show that this assumption leads to an absurd conclusion. Let us assume that IC1 intersects IC2 at point E shown in the figure given here.

Total utility refers to the aggregate of utility derived by the consumer from all units of a commodity consumed. It is an aggregate of utilities from all successive units of a commodity consumed. It is said that the MU of money never becomes zero. It increases when the stock of money increases.

Sufficient conditions satisfy. In the above diagram, the consumer will reach equilibrium at point E where budget line RS is tangential to the highest possible IC2. As we know total utility is the sum total of marginal utilities as shown below. The rate at which consumers are willing to exchange one unit of good for an other one. Marginal utility is constant as you move along an indifference curve. MU curve shows zero and negative level of satisfaction whereas, TU curve shows maximum level of satisfaction.