Question
When MU is zero, TU diminishes.
✓
Answer
No, I do not agree with this statement.
- When MU is zero the TU is the maximum.
- MU is the additional utility derived from the consumption of last unit of commodity.
- The TU is the sum of utilities derived from all units of consumption.
- The inter relationship between MU and TU can be explained with the help of the schedule.
Units of Commodity Marginal Utility (M.U) 1 10 2 8 3 6 4 4 5 2 6 0 7 -2
- From the schedule it can be observed that when a consumer keeps on consuming the same commodity continuously the MU diminishes and TU increases but at a diminishing rate.
- At the point of satiety i.e., unit 5 the consumer enjoys maximum satisfaction. Therefore, the MU becomes zero and TU reaches maximum i.e., 28 units.
- Here the consumer is fully satisfied. If the consumer keeps on consuming further units of the commodity after satiety, he derives dissatisfactions. Therefore, the MU becomes Negative and TU also starts falling or decreasing.
- Thus, at the point of full satisfaction MU is zero and it intersects the ‘X’ – axis and TU is maximum
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