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Economics notes

# Definition And Calculation Of Total Utility And Marginal Utility

Satisfaction

➡️ Utility is the capacity of a good or service to satisfy a consumer's wants or needs. It is the benefit or satisfaction that a consumer receives from consuming a good or service.

➡️ Utility can be measured in terms of the amount of satisfaction a consumer receives from consuming a good or service. This is known as utility maximization, which is the process of maximizing the amount of satisfaction a consumer receives from consuming a good or service.

➡️ Utility is an important concept in economics because it helps to explain why consumers make certain decisions. By understanding the utility of a good or service, economists can better understand why consumers choose to purchase certain goods or services over others.

### What is total utility and how is it calculated in economics?

Total utility refers to the overall satisfaction or usefulness that a consumer derives from consuming a particular good or service. It is calculated by adding up the marginal utility of each unit of the good or service consumed. For example, if a consumer derives 10 units of satisfaction from the first unit of a good, 8 units from the second unit, and 6 units from the third unit, the total utility would be 24 units.

### What is marginal utility and how is it calculated in economics?

Marginal utility refers to the additional satisfaction or usefulness that a consumer derives from consuming one more unit of a good or service. It is calculated by taking the change in total utility resulting from consuming an additional unit of the good or service. For example, if a consumer's total utility increases from 10 to 12 units after consuming an additional unit of a good, the marginal utility of that unit would be 2 units.

### How does the law of diminishing marginal utility relate to consumer behavior?

The law of diminishing marginal utility states that as a consumer consumes more units of a good or service, the marginal utility of each additional unit will eventually decrease. This means that the consumer will derive less and less satisfaction from each additional unit consumed. As a result, consumers will typically only continue to consume a good or service up to the point where the marginal utility equals the price they are willing to pay for it. This helps to explain why consumers tend to purchase smaller quantities of goods with higher prices, and larger quantities of goods with lower prices.

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