Economics Marginal Utility Questions Long
Total utility refers to the overall satisfaction or benefit that a consumer derives from consuming a certain quantity of a good or service. It represents the sum of the marginal utilities obtained from each unit consumed.
Marginal utility, on the other hand, refers to the additional satisfaction or benefit that a consumer gains from consuming one additional unit of a good or service. It measures the change in total utility resulting from the consumption of an additional unit.
The relationship between total utility and marginal utility can be understood through the concept of diminishing marginal utility. According to this principle, as a consumer consumes more and more units of a good, the additional satisfaction or benefit derived from each additional unit decreases.
Initially, when a consumer starts consuming a good, the marginal utility is usually high. This is because the consumer is fulfilling their most urgent needs or desires with the first few units of the good. As more units are consumed, the marginal utility starts to diminish. This means that each additional unit provides less and less satisfaction or benefit compared to the previous unit.
As a result, the total utility increases at a decreasing rate. Initially, the total utility rises rapidly as the consumer consumes more units and the marginal utility is high. However, as the consumer continues to consume more units, the marginal utility decreases, causing the total utility to increase at a slower rate. Eventually, a point is reached where the marginal utility becomes zero or even negative, indicating that the consumer is no longer gaining any additional satisfaction from consuming more units. At this point, the total utility reaches its maximum and may start to decline if the consumer continues to consume even more units.
In summary, total utility represents the overall satisfaction derived from consuming a certain quantity of a good, while marginal utility measures the additional satisfaction gained from consuming one additional unit. The relationship between total utility and marginal utility is characterized by diminishing marginal utility, where the additional satisfaction obtained from each additional unit decreases as more units are consumed.