Question

Explain the relationship between total utility and marginal utility

Answer 1

Total Utility (TU) refers to the aggregate utility derived by the consumer from all units of a commodity consumed while Marginal Utility (MU) is the additional utility derived by the consumer on consumption of an additional unit of the commodity.

Relationship between total utility and marginal utility:

Marginal Utility (MU) derived from consumption of various units of a commodity and its Total Utility (TU) are interrelated.

This can be explained with the help of the following example:

1. Utility Schedule: 

Explanation:

From the above schedule, it can be observed that:

1. When the first chocolate is consumed, the TU and MU are the same.
2. As the consumer consumes more chocolates, the TU goes on increasing (at diminishing rate) from 10 to 18 to 22 to 24 while the MU goes on decreasing from 10 to 8 to 4 to 2. In short, TU increases at a diminishing rate and MU goes on diminishing with the consumption of additional units of chocolate. (TU ↑ MU ↓)
3. After the consumption of fourth chocolate, TU reaches its maximum and remains constant even after fifth chocolate is consumed whereas MU becomes zero. This is called the point of satiety. (TU highest, MU = 0)
4. On the consumption of 6th unit, the Total Utility reduces from 24 to 22 and the Marginal Utility becomes negative i.e. -2 (disutility). Therefore, when Total Utility reduces, the Marginal Utility becomes negative. (TU ↓ MU negative).
5. After reaching the point of satiety, a rational consumer should stop his consumption. This is because the maximum limit of satisfaction is reached and there is no further addition to Total Utility from increase in the stock of a commodity.
6. Consumption beyond the point of satiety transforms satisfaction into dissatisfaction. In other words, a consumer starts experiencing ill effects of consumption.

2. Digram: 

X axis represents no. of units consumed and Y axis represents Total and Marginal Utility.

Explanation:

1. TU and MU curve begin at the same point. 
2. The TU curve slopes upwards from left to right.
3. The MU curve slopes downwards from left to right. 
4. TU curve increases at a decreasing rate while MU curve diminishes with additional units consumed. 
5. When TU curve is at the maximum point, the MU is zero (i.e. it touches the X-axis). This is the point of satiety or point of maximum satisfaction.
6. When TU curve slopes downwards, the MU curve becomes negative. This indicates dis-satisfaction or disutility.