Question

State with reason whether you agree or disagree with the following statement

When total utility is maximum, marginal utility is zero.

Answer 1

I agree with the given statement.

Reason:

1. Total Utility (TU) is the sum total of the utilities derived by a consumer by consuming all units of a commodity at given point of time. In simple words, it is the sum of marginal utilities derived from successive consumption of units. 
2. Marginal Utility (MU) is the additional utility derived by the consumer on consumption of an additional unit of the commodity. In short, it is additional utility derived from the last unit consumed. 
3. Marginal utility derived from various units of a commodity and its total utility are interrelated. This can be explained with the help of the following schedule: 

   No. of units	Total Utility (TU)	Marginal Utility (MU)
   1	10	10
   2	18	8 (18-10)
   3	22	4 (22-18)
   4	24	2 (24-22
   5	24	0 (24-24)
   6	22	-2 (22-24)

4. From the above schedule, it can be observed that:

1. After the first unit is consumed, the TU and MU are the same. 
2. As the consumer consumes more units, the TU goes on increasing from 10 to 18 to 22 to 24 while the MU goes on decreasing from 10 to 8 to 4 to 2. 
3. TU increases at a diminishing rate and MU goes on diminishing with additional consumption.
4. After consumption of 4th unit, TU reaches its maximum and remains constant even after consumption of 5th unit whereas MU becomes zero at that point. This is called the point of satiety. (TU highest, MU = 0)

This shows that when total utility is maximum, marginal utility is zero.