Page 20 - VIRANSH COACHING CLASSES

TU Curve = Total Utility Curve
You should know :
Formulae explaining the relationship MU Curve = Marginal Utility Curve
between total utility and marginal utility : X axis measures the units of the commodity
TU = Σ MU or consumed while Y axis indicates the figures of
TU = MU + MU + MU ……….. + MU
1 2 3 n total and marginal utility.
MU = TU – TU
n n (n–1)
Where TU = Total Utility Fig. 2.7 shows that total utility curve slopes
MU = Marginal Utility upwards whereas marginal utility curve slopes
MU , MU , MU = Marginal Utility of each unit. downwards. Marginal utility curve shows zero
1 2 3
th
MU = Marginal Utility of n unit. and negative levels of marginal utility whereas
n
th
TU = Total Utility at n level. total utility curve shows maximum and constant
n
TU = Total Utility at previous level. total utility level.
(n–1)
Relationship between Total Utility and 1) Total utility and marginal utility of the very
Marginal Utility : first unit of x consumed, are the same.
Marginal utility derived from various 2) As the consumer consumes further
units of a commodity and its total utility are units of x, the total utility increases at a
interrelated. This can be easily followed from diminishing rate and marginal utility goes
the hypothetical example given in the table 2.1 on diminishing. (TU MU)
Table 2.1 Utility Schedule 3) At a particular stage, total utility reaches to
Units of x Total utility Marginal utility
1 10 10 its maximum and remains constant whereas
2 18 8 marginal utility becomes zero. This is called
3 24 6 the point of satiety. (TU highest, MU = 0)
4 28 4 4) After this point, any additional unit
5 30 2
6 30 0 consumed further results in a decline in the
7 28 –2 total utility, while marginal utility becomes
Table 2.1 explains the relationship between negative. (TU MU negative)
total utility and marginal utility. 5) After reaching the point of satiety, a rational
On the basis of Table 2.1 Total utility and consumer should stop his consumption
Marginal Utility curves (TU and MU) can be since the maximum limit of satisfaction is
derived with the following diagram. reached and there is no addition to total
Y Point of satiety
32 utility by any further increase in the stock
S of a commodity.
28
TU
Curve 6) Consumption beyond the point of satiety
Total and Marginal utility 16 In other words, a consumer starts
24
transforms satisfaction into dissatisfaction.
20
experiencing ill effects of consumption.
12
8
Complete the following chart with proper
4 Try this :
statement and bring about the difference

0 1 2 3 4 5 6 7 X between the two concepts i.e total utility
MU
-4 Disutility Curve and marginal utility.
Units of Commodity x Fig. 2.7
11