Where Total Utility Is At A Maximum, Marginal Utility Is

Juli 30, 2022

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The relation between total and marginal utility is explained with the help of table 1. So long as total utility is increasing, marginal utility is decreasing up to the 4th unit. When total utility is maximum at the 5th unit, marginal utility is zero. It is the point of satiety for the consumer.

When marginal utility is zero, total utility is maximum. It is based in the law of diminishing marginal utility which says 'as more and more units of a good are consumed, mu i. e level of satisfaction derived from each successive unit goes on. Summing up total utility is the amount of satisfaction (utility) obtained from consuming a particular quantity of a good or service within a given time period. It is the sum of marginal utilities of each successive unit of consumption. Formula or equation for total utility (tu): Definition and explanation with example. The combination of goods or services that maximize utility is determined by comparing the marginal utility of two choices and finding the alternative with the highest total utility within the budget limit. The decision is influenced by the option that produces a higher level of satisfaction. When the marginal utility is zero, total utility is maximum (at 6 th unit).