Total Utility (TU) and Marginal Utility (MU) are key concepts in economics that help to understand consumer behavior and the satisfaction derived from goods and services.
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Total Utility (TU): Total Utility is the overall satisfaction or benefit that a consumer derives from all units of a good or service consumed. It refers to the cumulative pleasure or happiness obtained from consumption. Total Utility increases as more units of a good are consumed, although it may increase at a decreasing rate due to the law of diminishing marginal utility.
Mathematically, if a consumer consumes \(X\) units of a good, the Total Utility can be expressed as: \[ TU(X) = U_1 + U_2 + U_3 + ... + U_X \] where \(U_i\) represents the utility derived from each individual unit.
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Marginal Utility (MU): Marginal Utility is the additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service. It measures the change in total utility resulting from the consumption of an additional unit. Marginal Utility can be thought of as the derivative of Total Utility with respect to the quantity consumed.
Mathematically, it can be expressed as: \[ MU = \frac{\Delta TU}{\Delta Q} \] where \(\Delta TU\) is the change in Total Utility and \(\Delta Q\) is the change in the quantity consumed.
In summary, while Total Utility provides a cumulative measure of satisfaction, Marginal Utility details the incremental satisfaction gained from consuming additional units. The concept of diminishing marginal utility states that as a consumer consumes more of a good, the additional satisfaction derived from each subsequent unit typically decreases.