Undoubtedly, utility is the best yardstick to judge and understand consumer behaviour and decision making of both consumers as well as producers. The concepts of marginal utility and total utility play a crucial role in understanding and determining demand of product. In this blog post, “Relationship Between Marginal Utility and Total Utility” we will explore what these terms mean, how they are related, and provide examples to help illustrate their significance.
Defining Marginal Utility
Marginal utility refers to the additional satisfaction or benefit that a consumer derives from consuming one additional unit of a good or service. It is important to note that marginal utility diminishes as consumption increases.
For example, let’s say you are eating a slice of pizza. The first bite of the pizza will provide you with a high level of satisfaction, or utility. However, as you continue to eat more slices, the satisfaction you derive from each additional slice will decrease. This is because the marginal utility of each additional slice diminishes.
Understanding Total Utility
Total utility, on the other hand, refers to the overall satisfaction or benefit that a consumer receives from consuming a certain quantity of a good or service. It is the sum of the marginal utilities of each unit consumed.
Using the same example of eating pizza, the total utility would be the combined satisfaction you derive from eating all the slices of pizza. As you eat more slices, the total utility will continue to increase, but at a decreasing rate.
Graphical Representation of Marginal Utility
Graphically, marginal utility is represented by a downward-sloping curve. The x-axis represents the quantity consumed, while the y-axis represents the marginal utility.
Initially, the curve is steep, indicating high marginal utility. As the quantity consumed increases, the curve becomes flatter, indicating diminishing marginal utility.It is important to note that the marginal utility curve can differ for different individuals and goods.
For example, a person who loves chocolate might experience a slower decline in marginal utility as they consume more chocolate compared to someone who is not a fan of chocolate.
What is Total Utility?
Total utility, on the other hand, refers to the overall satisfaction or benefit that a consumer derives from consuming a certain quantity of a good or service. It is the sum of the marginal utilities of each unit consumed.
Graphically, total utility is represented by an upward-sloping curve. Initially, as the quantity consumed increases, the total utility increases at an increasing rate. However, as the quantity consumed continues to increase, the total utility starts to increase at a decreasing rate. Eventually, it may even reach a point where the total utility starts to decline.
The Relationship Between Marginal Utility and Total Utility
The relationship between marginal utility and total utility can be summarized as follows:
- When marginal utility is positive and greater than zero, total utility increases.
- But, When marginal utility is zero, total utility is at its maximum.
- When marginal utility is negative, total utility decreases
Let’s go back to the pizza example. As long as each additional slice of pizza provides you with some level of satisfaction, the marginal utility is positive, and therefore, the total utility increases.
However, there will come a point where you start feeling full and the marginal utility of each additional slice becomes zero. At this point, the total utility is at its maximum. If you were to continue eating more slices, the marginal utility would become negative, and the total utility would start to decrease.
Examples of Marginal Utility and Total Utility
Here are a few more examples to help further illustrate the concept:
When purchasing a new car, the first few features and upgrades may provide a significant increase in marginal utility. However, as you add more features, the marginal utility diminishes, and the total utility increases at a decreasing rate.
Second, When buying a new pair of shoes, the first pair may provide a high level of satisfaction. However, as you buy more pairs, the marginal utility decreases, and the total utility increases at a decreasing rate.
Third, When consuming chocolate, the first few bites may be incredibly enjoyable, but as you continue to eat more, the marginal utility decreases, and the total utility increases at a decreasing rate.
Last words on Relationship Between Marginal Utility and Total Utility
Marginal utility and total utility are important concepts in understanding consumer behavior and decision-making. Marginal utility measures the additional satisfaction from consuming one more unit of a good, while total utility represents the overall satisfaction from consuming a certain quantity. Understanding the relationship between these two concepts can help individuals make informed choices and maximize their utility.Marginal utility total utility and diminishing marginal utility/Marginal Utility: Role and importance/Understanding utility in economics/Understanding the law of demand and supply
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