Concepts of Utility
Concepts of Utility :
Following are the two main concepts of utility :
- Total Utility (TU) : Total utility refers to the aggregate of utility derived by the consumer from all units of a commodity consumed. It is an aggregate of utilities from all successive units of a commodity consumed.
Marginal Utility (MU) : Marginal utility refers to the additional utility derived by a consumer from an additional unit of a commodity consumed. In other words, it is the addition made by the last unit of a commodity consumed.
Relationship between Total Utility and Marginal Utility :
Marginal utility derived from various units of a commodity and its total utility are interrelated. This can be easily followed from the hypothetical example given below.
Utility Schedule
Units of x | Total utility | Marginal utility |
1 | 10 | 10 |
2 | 18 | 8 |
3 | 24 | 6 |
4 | 28 | 4 |
5 | 30 | 2 |
6 | 30 | 0 |
7 | 28 | –2 |
Above table explains the relationship between total utility and marginal utility.