Question
Explain the relationship between $MU$ and $TU.$
✓
Answer
MU & $TU$ are inter-related concepts but there is a difference between $MU$ and $TU$ because $MU$ shows utility derived from each unit whereas, $TU$ indicates summations of marginal utilities.
It can be explained with the help of following schedule –
The above given schedule indicates MU derived from each successive unit & TU – summation of MU’s.
On the basis of given schedule, MU curve and TU curve can be drawn, as shown in the following diagram.
It can be explained with the help of following schedule –
The above given schedule indicates MU derived from each successive unit & TU – summation of MU’s.
On the basis of given schedule, MU curve and TU curve can be drawn, as shown in the following diagram.
In the given diagram $X ^{\prime}$ axis indicates units of commodity and ' Y ' axis measures $TU \& MU$.
MU curve slopes downward whereas; TU curve goes upward.
MU curve shows zero and negative level of satisfaction whereas, TU curve shows maximum level of satisfaction.
The relationship between MU and TU can be summarized as follows:
1. When the 1st unit of commodity is consumed, $M U$ is equal to $T U .(M U=T U)$
2. From 2nd consumption, MU goes on diminishing and TU increases at a diminishing rate. (MU॥ 1. and TU $\uparrow \uparrow \uparrow$ )
3. At a full satisfaction level, MU becomes zero \& TU reaches at maximum level. It becomes constant. It is called point of satiety. (MU zero, TU max ${ }^{\text {m }}$ )
4. After a point of satiety, any additional consumption of unit results into negative MU while TU starts declining. (MU-ve, TU!)
5. If any unit of commodity consumed beyond the point of satiety, consumer experiences dissatisfaction.
MU curve slopes downward whereas; TU curve goes upward.
MU curve shows zero and negative level of satisfaction whereas, TU curve shows maximum level of satisfaction.
The relationship between MU and TU can be summarized as follows:
1. When the 1st unit of commodity is consumed, $M U$ is equal to $T U .(M U=T U)$
2. From 2nd consumption, MU goes on diminishing and TU increases at a diminishing rate. (MU॥ 1. and TU $\uparrow \uparrow \uparrow$ )
3. At a full satisfaction level, MU becomes zero \& TU reaches at maximum level. It becomes constant. It is called point of satiety. (MU zero, TU max ${ }^{\text {m }}$ )
4. After a point of satiety, any additional consumption of unit results into negative MU while TU starts declining. (MU-ve, TU!)
5. If any unit of commodity consumed beyond the point of satiety, consumer experiences dissatisfaction.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.
Explore more
Similar questions
Define perfect competition and explain price determination under perfect competition.
What is monopoly? Explain the features of monopoly.
Write short notes on types of demand.
What are the different types or forms of utility?
What are features of monopolistic competition?
Explain the various concepts of Utility.
Explain the concept of Macro economics and its features.
Explain the significance / uses of index numbers in economics?
Define index number. What are its main features?
What is National Income? Explain the Output method of measuring National Income.