The Law of Diminishing Marginal Utility Class 11 CBSE MICROECONOMICS

When the tops of these blocks are joined by a smooth line, we obtain the MU curve. So long as the TU curve is rising, the MU curve is falling. When the former reaches the highest point Q1 the latter touches the X-axis at point С where the MU is zero. When the TU curve starts falling from Q onwards, the MU becomes negative from С onwards.

One more way to measure Utility

Any point outside the area is a non-attainable combination, which the consumer cannot afford to buy. The law of demand is founded on this principle, as the concept of reduced pricing is related to the Law of Diminishing Marginal Utility. When TU is at its maximum point, MU becomes zero; i.e., when the 5th burger is consumed. The relationship between TU and MU can be explained with the help of the following schedule and diagram. With the help of the above schedule the relationship between MU and TU can be represented in the diagram.

This law states that as a consumer consumes more and more units of a specific commodity, the utility (satisfaction) derived from each successive unit consumption goes on falling. Marginal utility is the addition made to total utility by having an additional unit of the commodity. When the consumer consumes the third apple, the total utility becomes 45 utils. Thus, marginal utility of the third apple is 10 utils (45—35).

Theory of Consumer Behaviour Class 12 Notes: CBSE Microeconomics Chapter 2

MU can also be calculated when the change in units consumed is more than one. In the above example, let us assume that 1 util is equal to ₹1. Now, the utility derived from the consumption of cake will be ₹15, which is known as the value of utility in terms of money.

Content: Marginal Utility (MU)

This is the point where the slope of both, the indifference curve and budget line are equal to each other. The when mu is falling tu is budget constraint includes all the different combinations of goods or products that a person can afford based on the cost of goods and consumer income. The budget line is a graphical representation of all the bundles that cost the same as the consumer’s income. The budget line depicts two different combinations of goods that a consumer can buy based on his or her income and commodity prices.

1. Utility is a relative concept, this means that it differs from individual to individual, from location to location, and from period to period.
2. The second apple will naturally be the second best with lesser amount of utility than the first, and has 15 utils.
3. The MU curve is represented by the increment in total utility shown as the shaded block for each unit in the figure.
4. In other words, if everything else remains constant, the price of a commodity and its quantity requested have an inverse relationship.
5. At the midpoint of any linear demand curve, the value of ed is unity.
6. Utils are imaginary and psychological units that are used to measure satisfaction obtained from the consumption of a certain quantity of a commodity.

By connecting the tops of these rectangles with a smooth line, we get the TU curve that peaks at point Q and then slowly declines. To draw the MU curve, we take marginal utility from column (3) of the table. When a consumer consumes the 6th unit of the commodity, s/he gets no utility or there is zero utility and as a result, total utility (TU) remains constant and becomes maximum. Utility refers to the satisfaction or benefit a consumer gets from consuming a good or service.

When total utility is maximum at the 5th unit, marginal utility is zero. When total utility is decreasing, marginal utility is negative (the 6th and the 7th units). These units give disutility or dissatisfaction, so it is no use having them. To draw the curves of total utility and marginal utility, we take total utility from column (2) of Table 1.