Total Utility and Marginal Utility

Relationship between Total Utility and Marginal Utility

There is a definite and well defined relationship between total utility and marginal utility.

Total Utility

It refers to the total satisfaction derived by the consumer from the consumption of a specific quantity of a commodity.

For example, the total utility of consuming two apples is the total satisfaction that these two apples provide.

Marginal Utility

It refers to the additional utility derived from the consumption of an additional unit of a commodity.

The relation between total utility and marginal utility is shown in below graph.

Graph ‘A’ shows that the total utility increases first,  reaches the maximum and then starts decreasing

Graph ‘B’ shows continuously decreasing marginal utility curve

marginal utility

Let us analyze the graph deeply

1) Total utility curve is concave from above, which is due to declining slope of the curve, which means declining marginal utility (as shown by the shaded line in graph ‘A’).

Till point M (at the fourth unit of consumption), the TU(total utility) curve has a positive slope, but the slope goes on decreasing indicating that TU is increasing but at a decreasing rate (i.e. from first unit, 10 is TU then 17,then 21,then 22).

This is due to falling MU (marginal utility), since as the unit consumed increases the satisfaction derived (i.e. MU) falls.

2) When total utility is maximum at point M (i.e. 22), marginal utility is zero at the fifth unit of consumption. This is said to be the satiation point beyond which additional consumption reduces total utility.

 After this stage MU becomes negative and TU starts declining.

A rational consumer will not like to go beyond the point of maximum total utility.

3) After M (at sixth unit of consumption), the slope of the total utility curve becomes negative showing that the MU is negative. Thus, when TU declines MU is negative.

To conclude:

When TU is	Then MU is
Increasing at a decreasing rate	Decreasing , but is positive
At the maximum	Zero
Decreasing	Negative