Utility 📚
In economics, utility is the satisfaction or happiness a person gets from consuming a good or service. Think of it as the “taste” you feel when you eat a slice of pizza 🍕.
- Utility is subjective – it varies from person to person.
- We measure it in utils (just a unit, not a real thing).
- More consumption usually means more utility, but the extra satisfaction from each additional unit tends to shrink.
Total Utility (TU) 📈
Total Utility is the sum of all the satisfaction you get from consuming a certain quantity of a good.
Mathematically:
\$TU = \sum{i=1}^{n} MUi\$
Where MU is the marginal utility of each unit.
Marginal Utility (MU) ➕➖
Marginal Utility is the extra satisfaction from consuming one more unit of a good.
Formula:
\$MU = \frac{\Delta TU}{\Delta Q}\$
In words: MU equals the change in total utility divided by the change in quantity.
Key rule: Diminishing Marginal Utility – the MU of each additional unit usually falls.
Example: Pizza Slices 🍕
| Quantity (Q) | Total Utility (TU) | Marginal Utility (MU) |
|---|
| 1 | 10 | 10 |
| 2 | 18 | 8 |
| 3 | 24 | 6 |
| 4 | 27 | 3 |
| 5 | 27 | 0 |
| 6 | 26 | -1 |
Notice how the MU drops from 10 to 8 to 6 … and eventually becomes negative – that means you’d rather not eat more pizza.
Exam Tips for Utility Questions 🎯
- Read the question carefully: total or marginal? Use the appropriate formula.
- When a table is given, compute MU by subtracting the previous TU from the current TU.
- Show your work – teachers love clear steps.
- Remember the diminishing marginal utility rule: MU usually falls as Q rises.
- If MU becomes negative, note that the consumer would stop buying that good.
- Use the formula \$MU = \frac{\Delta TU}{\Delta Q}\$ when the question asks for a specific change.
- Check units: TU and MU are in utils; Q is in units.
- When asked to graph, plot MU on the Y‑axis and quantity on the X‑axis – it should slope downward.
- Use the term “marginal” to emphasize that you’re looking at the change from one unit to the next.
- Practice with different goods: food, books, video games – the concept is the same.