Saturday, August 4, 2018

Units for "Measure of Pleasure" from goods & services

Total Utility: It is total amount of satisfaction that a consumer derives from all the units of commodities or service.
Marginal Utility: It is the utility derived by the consumer from consuming the additional units i.e., more than one unit of a commodity.

Example: Let us assume the following data is a measure of satisfaction (in terms of utils) derived from mobile usage from 1 to 7 hours continuously. Then the Total utility & marginal utility are as follows.








 







Then following depicts the above data in the form of curves, where X-axis represents no. of hours of mobile usage & Y-axis represents the utils from consumption.







 







The above data represents the relationship between total quantity(hours) consumed or used, total utility & marginal utility.
observations:
  1. when marginal utility is zero, total utility will be maximum.
  2. when marginal utility falls, total utility increase at diminishing rate.
  3. when marginal utility is negative, total utility decreases.

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