Total utility

In economics, utility refers to the amount of satisfaction that a consumer gains from a particular good or service.

  • Total utility refers to the complete amount of satisfaction gained.
  • Marginal utility refers to the satisfaction gained from an extra unit consumed.
  • If the marginal utility of the last item is positive – then total utility will be increasing
  • If the marginal utility of the last consumption is negative – total utility will be falling

Example of Marginal and Total Utility for Icecream consumption

 

  • total-utility-graphTotal utility is maximised at the point where Marginal utility is zero. (quantity 5 or 6)
  • Total utility starts to fall when marginal utility is negative

total-utility

This shows the law of diminishing marginal utility of consumption. If you eat too many ice-creams, you start to get negative utilty and the total satisfaction starts to decline

Consumption decisions

The decision of how much to consume also depends on the marginal cost of production.

See: marginal utility theory

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