Economics – Utility | e-Consult

Total Utility (TU) refers to the overall satisfaction or benefit a consumer receives from consuming a given quantity of a good or service. It's a measure of the total level of satisfaction.

Marginal Utility (MU) is the additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service. It represents the change in total utility resulting from consuming an extra unit.

Law of Diminishing Marginal Utility states that as a consumer consumes more and more of a good or service, the additional satisfaction gained from each additional unit will eventually decrease. In other words, MU tends to fall as quantity consumed increases.

Relationship to Total Utility: TU is the cumulative sum of MU. Initially, as MU is positive, TU increases at an increasing rate. However, as MU diminishes (due to the law of diminishing marginal utility), the rate of increase in TU slows down. Eventually, MU can become negative (if the good is consumed excessively), and TU will then start to decrease. The point where MU equals zero represents the point of maximum total utility.

Diagram: (A diagram would be included here, showing a typical U-shaped curve for total utility. The x-axis would represent quantity consumed, and the y-axis would represent total utility. The MU curve would be shown below the TU curve, illustrating its diminishing nature.)

Note: A diagram is crucial for a complete answer. It should clearly label the axes, the TU curve, and the MU curve.