Utility is a relative concept, this means that it differs from individual to individual, from location to location, and from period to period. It is the representation of negative utility and total utility declines. In the above example, we have already seen that the marginal utility and the total utility are the interlinked concepts. It's a social science that studies how commodities and services are produced, distributed, consumed, and traded. The decisions made by private citizens, corporations, governments and nations are observed when allocating resources. In other words, it's the study of scarcity, the study of how people utilise resources and respond to incentives or the study of decision making.

To draw the curves of total utility and marginal utility, we take total utility from column (2) of Table 1 and obtain rectangles. The MU curve is represented by the increment in total utility shown as the shaded blocks in the figure. Consumers are the ones who make the majority of consumption decisions. A consumer is someone who buys goods and services to fulfil demands. He makes choices about the kinds of items to be bought to fulfil his desires. The primary goal is to maximise satisfaction from the goods and services he purchases with his income.

Content: Marginal Utility (MU)

Let us learn what is meant by Total Utility and Marginal Utility. If we sum the utilities obtained from the consumption of different units of a particular commodity at a given time, then we get the numerical value of total utility. If the MU is a positive unit, we may say that the total utility goes on increasing. It means that the consumer is getting positive satisfaction out of each when mu is falling tu is unit consumed. Indifference curves represent different combinations of goods that give a consumer the same level of satisfaction. They help in understanding consumer preferences and how consumers choose between different combinations of goods.

Elasticity of Demand:

Our notes will guide you through the essentials of this chapter, aligning with the CBSE Class 12 Economics Syllabus. They provide a clear explanation of theories and practical applications, ensuring you grasp the material effectively. If customers want to buy one more unit of Item 1, they may only do so if they are willing to give up some quantity of another good.

1. However, there was no standardised method of calculating utility; so the economists came up with a hypothetical unit of measurement called Util.
2. When there is a rise in consumer income, it shifts the budget line towards the right.
3. After the 6th unit consumption of goods, MU is negative (-2) and due to negative MU, total utility declines to 28 utils from 30 utils.
4. Therefore, various economists suggested that utility should be measured in monetary terms.

Chapter 8: Theory of Supply

Util is assumed as a unit for measuring the satisfaction derived from a commodity. The marginal rate of substitution or MRS is the rate at which the consumer is ready to substitute one good to get one more unit of the other good. This is calculated as the slope of an indifference curve. A shift in the demand curve is caused by changes in non-price factors, such as income, taste, expectation, population, price of comparable commodities, and so on. Movement in the demand curve occurs when a commodity experiences a change in both quantity demanded and price, leading the curve to move in a specific direction.

Utility:

The rate at which a consumer substitutes one good for another as long as the latter good is providing equal satisfaction is known as the marginal rate of substitution. The capacity of a commodity to meet a need is its utility. The more the utility obtained from an item, the greater the need for it or the stronger the desire to have it. The same product can provide various levels of utility to different people. A consumer's desire for an item is usually determined by the utility (or satisfaction) he obtains from it.

Up to 5 units of consumption, marginal utility (MU) is decreasing and remains positive. Until the marginal utility (MU) is positive, total utility (TU) surges/rises at a declining rate. According to the law of diminishing marginal utility, as a consumer consumes more units of a commodity, the marginal benefit received from each succeeding unit declines. There is a direct relationship between total utility and marginal utility. Total utility is always based on marginal utility as a total utility (TU) is the summation of marginal utilities. The relationship between TU and MU can be explained with help of the following table.

When the consumer consumes 2nd unit of goods, TU increases to 18 utils from 10 utils and MU decreases to 8 utils. Accordingly, when the consumer consumes the 6th unit of goods, MU decreases to zero where TU becomes maximum (30 utils). After the 6th unit consumption of goods, MU is negative (-2) and due to negative MU, total utility declines to 28 utils from 30 utils.