What is utility? Discuss the relationship between total utility and marginal utility.
Understand the Problem
The question is asking for an explanation of the concept of utility, specifically focusing on the relationship between total utility and marginal utility. Total utility refers to the overall satisfaction or benefit obtained from consuming a certain amount of a good or service, while marginal utility refers to the additional satisfaction gained from consuming one more unit. The user is likely looking for a detailed analysis of how these two concepts interact and influence consumer behavior.
Answer
Utility is the satisfaction from consuming goods/services. Total utility is the total satisfaction; marginal utility is the satisfaction from an additional unit. If marginal utility is positive, total utility increases; if negative, total utility decreases.
Utility in economics refers to the satisfaction or benefit derived from consuming goods or services. Total utility is the sum of satisfaction from all units consumed. Marginal utility is the change in satisfaction from consuming one additional unit. As long as marginal utility is positive, total utility increases. When marginal utility becomes negative, total utility starts to decrease.
Answer for screen readers
Utility in economics refers to the satisfaction or benefit derived from consuming goods or services. Total utility is the sum of satisfaction from all units consumed. Marginal utility is the change in satisfaction from consuming one additional unit. As long as marginal utility is positive, total utility increases. When marginal utility becomes negative, total utility starts to decrease.
More Information
Utility is a fundamental concept in economics describing the satisfaction a consumer receives. The relationship between marginal utility and total utility illustrates how additional consumption affects total satisfaction.
Tips
A common mistake is failing to recognize that once marginal utility turns negative, total utility declines. Another mistake is assuming marginal utility remains constant, while it typically changes with each additional unit consumed.
Sources
- Marginal utility and total utility - Khan Academy - khanacademy.org
- Relationship between total utility and marginal utility - econdev.co.za
- Total Utility in Economics: Definition and Example - Investopedia - investopedia.com
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