Total Utility and Marginal Utility

People buy goods because they get satisfaction from them. This satisfaction which the consumer experiences when he consumes a good, when measured as number of utils, is called utility. It is here necessary to make distinction between total utility and marginal utility.

Total utility (TU): Total utility is the total satisfaction which a consumer derives from the consumption of a particular good over a period of time. For example, a person consumes five units of a commodity and derives utility from the successive units of a good, his total utility will be,

Marginal Utility (MU): It can also be described as the extra satisfaction which a consumer gets from consuming additional unit of a good. More precisely, it is defined as the, addition to the total utility obtained from the consumption of one more unit. For example, the marginal utility of second glass of water is the change in total utility resulting from consuming the second glass of water.

Thus

Here Change in total utility and change in Consuming an additional unit of a good. It can also be expressed as here means total utility derived from the consumption of n units of a good and is the total utility derived from the consumption of units.

It may here be noted that as a person consumes more and more units of a commodity, the marginal utility of the additional units begins to diminish but the total utility goes on increasing at a diminishing rate. When the marginal utility comes to zero or we say the point of satiety is reached, the total utility is the maximum. If consumption is increased further from this point of satiety, the marginal utility becomes negative and the total utility begins to diminish.

The relationship between total utility and marginal utility is now explained with the help of following schedule and a graph.

Schedule showing marginal utility and total utility

Units of apples consumed daily	Total utility in utils per day	Marginal utility in utils per day
1	7	7
2	11	4 (11-7)
3	13	2 (13-11)
4	14	1 (14-13)
5	14	0 (14-14)
6	13	–1 (13-14)

The above table shows that when a person consumes no apples, he gets no satisfaction. His total utility is zero, In case he consumes one apple a day, he gains seven utils of satisfaction. His total utility is 7 and his marginal utility is also 7. In case he consumes second apple, he gains an extra 4 utils (MU). Thus giving him a total utility of 11 utils from two apples. His marginal utility has gone down from 7 utils to 4 utils because he has a less craving for the second apple. Same is the case with the consumption of third apple. The marginal utility has now fallen to 2 utils while the total utility of three apples has increased to 13 utils (7 + 4 + 2). In case the consumer takes fifth apple, his marginal utility falls to zero utils and if he consumes sixth apple also, the marginal utility is reduced to negative (13 – 14 = –1). It is –1 utils. The table showing total utility and marginal utility is plotted in figure below:

(1) The total.utility curve starts at the origin as zero consumption of apples yields zero utility.

(2) The TU curve reaches at its maximum or a peak of M when MU is zero.

(3) The MU curve falls throughout the graph. A special point occurs when the consumer consumes fifth apple. He gains no marginal utility from it. After this point, marginal utility becomes negative.

(4) The MU curve can be derived from the total utility curve. It is the slope of the line joining two adjacent quantities on the curve. For example, the marginal utility of the third apple is the slope of line joining points a and b. The slope of such a line is given by the formula . Here .