2.1.1.1. Measures of Utility

Total utility of a fixed quantity of a commodity (TU) is the total satisfaction derived from consuming the given amount of some commodity x. More of commodity x provides more satisfaction to the consumer. TU depends on the quantity of the commodity consumed. Therefore, TU refers to total utility derived from consuming n units of a commodity x.

Total Utility (TU) measures the overall satisfaction a consumer derives from consuming a specific quantity of a good. Essentially, as a consumer consumes more of a good, their satisfaction typically increases, reflecting the idea that the more you have of something pleasant, the more satisfied you feel. For instance, if you enjoy eating apples, eating three apples (as opposed to one) generally makes you happier because you get more of what you enjoy, leading to a higher total utility.

Think of a fun day at an amusement park. The more rides you go on, the happier you might feel, leading to greater total enjoyment from the entire day spent there. If you ride 5 rides, your total happiness from the park visit is higher than if you only ride 2.

Marginal utility (MU) is the change in total utility due to consumption of one additional unit of a commodity. For example, suppose 4 bananas give us 28 units of total utility and 5 bananas give us 30 units of total utility. Clearly, consumption of the 5th banana has caused total utility to increase by 2 units (30 units minus 28 units). Therefore, marginal utility of the 5th banana is 2 units.

Marginal Utility measures the additional satisfaction gained from consuming one more unit of a good. It's the difference in total utility before and after consuming that extra unit. Using the previous example of bananas, if you were to eat another banana after having four, your total happiness increases from 28 to 30. The additional happiness of 2 units represents the marginal utility of the fifth banana. This concept illustrates how each additional unit consumed may provide less satisfaction than the previous one, which relates to the phenomenon of diminishing marginal returns.

Imagine you're at a pizza party. The first slice of pizza you eat is delightful (high utility). By the time you eat your fourth slice, while it’s still good, you might not enjoy it quite as much; the fifth slice might even start to feel too much! This reflects diminishing marginal utility—each additional slice brings less joy than the last.

Total utility and marginal utility can also be related in the following way. TU = MU + MU + … + MU for n units of consumption. This simply means that TU derived from consuming n units of bananas is the sum total of marginal utility of first banana (MU1), marginal utility of second banana (MU2), and so on, till the marginal utility of the nth unit.

This equation illustrates that the total satisfaction from consuming multiple units of a good can be thought of as the sum of the satisfaction gained from each individual unit consumed. If you add up all the additional satisfaction from each banana (or any good), you will arrive at the total satisfaction or utility derived from consuming all those bananas together. In practical terms, if you have five bananas and know the marginal utility for each one, you can calculate the total satisfaction by adding them up.

Consider collecting stickers. The excitement (satisfaction) from each sticker is your marginal utility. If getting the first sticker gives you a thrill of 10 points, the second one 8 points, and the third one 5 points, your total utility for three stickers is 10 + 8 + 5 = 23 points of happiness. Each sticker adds less excitement than the one before.

Usually, it is seen that the marginal utility diminishes with increase in consumption of the commodity. This happens because having obtained some amount of the commodity, the desire of the consumer to have still more of it becomes weaker. Thus, the law of diminishing marginal utility suggests that as consumers consume more units of a good, the additional satisfaction obtained from each successive unit decreases.

The law of diminishing marginal utility explains a common consumer experience: as we consume more of something we enjoy, each additional unit tends to bring less satisfaction than the previous one. This is significant because it can influence consumer behavior and demand for a product. For example, when you start eating a favorite snack, the first few bites might be great but over time, you may grow less enthusiastic about it as you're already satisfied.

Think about eating cake. The first slice is filled with joy, the second continues to satisfy, but by the time you reach the fourth slice, you might feel full and a little less excited about eating more. This growing feeling of fullness and less desire is what causes the diminishing marginal utility.

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