The budget line graphically represents the bundles that cost exactly equal to the consumer’s entire income. It is a negatively sloped line, and its slope is determined by the ratio of the prices of the two goods (-Px/Py). It is possible that there can be a parallel shift in the budget line. The change happens because of the change in the consumer’s income and a change in the goods’ prices.

Marginal Utility (MU) derived from consumption of various units of a commodity and its Total Utility (TU) are interrelated. By understanding the relationship between total utility and marginal utility, we can gain insights into consumer behavior and make informed economic decisions. Marginal Utility (MU) refers to additional utility on account of the consumption of an additional unit of a commodity. 6.Marginal Utility (MU) It refers to additional utility on account of the consumption of an additional unit of a commodity. 5.Total Utility (TU) It is the sum total of Marginal Utilities derived from the consumption of all the units of a commodity.

Change country

The consumer would continue decreasing the consumption of commodity X till the equality between the ratio of marginal utility to price in case of X and Y is again reached. Utility, in economic terms, is a measure of satisfaction or pleasure derived from consuming a good or service. Understanding the concepts of Total Utility (TU) and Marginal Utility (MU) is crucial to grasp consumer behavior and decision-making processes. This article includes topics that define total utility and characteristics of utility. Let us explore these topics for a clear understanding.

Importance of Reason Based & Extra Questions – Utility Analysis

The same product can provide various levels of utility to different people. A consumer’s desire for an item is usually determined by the utility (or satisfaction) he obtains from it. What happens to marginal utility as more units of a good are consumed? Answer the following question.Discuss briefly, using a hypothetical schedule, the relation between marginal utility and total utility.

Market Demand:

These NCERT Solutions with answers for Class 12 Economics will come in exams and help you to score good marks Question 5.Want satisfying power of a commodity is called –(a) usefulness(b) satisfaction(c) happiness(d) utility Which feature of utility explains why woollen clothes are more valued in winter compared to summer? Which statement best explains the “subjective” nature of utility in economics? Additional utility derived by a consumer from an additional unit consumed. When total utility is maximum, marginal utility is zero.

According when mu is falling tu is to the IC analysis, a buyer maximises his utility by selecting a package of two commodities that is also within his budget. This will be used to calculate a commodity’s demand curve. In the diagram, where the IC curve is tangent to the budget line, that is point E is the optimal choice, and also a point of consumer equilibrium.

Maharashtra State Board 12th Economics Important Questions Chapter 2 Utility Analysis

The two goods are equally priced at Rs 10 and the consumer’s income is Rs 40. (Q1) A consumer wants to maximise his satisfaction from commodities X and Y but a rupee worth of marginal utility is not same for commodities. This is because of monotonic preferences, as monotonic preferences state that we must have atleast more of one good and no less that of other goods (means other goods can be equal or greater, but not less). The figure above shows that bundle F(OX2 + OY2) is monotonic preferred to bundle E(OX1 + OY1). For, e.g., point E lying on IC, represents OX, units of X and OY1 units of Y.

1.Consumer The one who takes decisions about what to buy for the satisfaction of wants, both as an individual or as a member of a household, is called a consumer. Doubtnut helps with homework, doubts and solutions to all the questions. It has helped students get under AIR 100 in NEET & IIT JEE. Get solutions for NEET and IIT JEE previous years papers, along with chapter wise NEET MCQ solutions.

• This point represents the highest possible satisfaction a consumer can achieve given their budget.
• 5.Total Utility (TU) It is the sum total of Marginal Utilities derived from the consumption of all the units of a commodity.
• When MU decreases, TU increases at a diminishing rate.

The effects of price changes on the amount desired of an item are described in the form of a law known as the law of demand. The quantity that a consumer is able and willing to purchase at a specific price and within a specific time frame. The budget line’s slope indicates how much change in good 2 is necessary per unit of change in good 1 along the budget line. The budget constraint includes all the different combinations of goods or products that a person can afford based on the cost of goods and consumer income.

(c) A consumer is said to be in equilibrium when he has allocated his available money income among different uses in such a way that he gets maximum marginal utility for each use. (Q1) “Law of diminishing marginal utility will operate even if consumption takes place in   intervals”. At a certain consumptionlevel of these goods, he finds that the ratio of marginal utility to price in case of X is lower than that in case of Y. OrBy spending his entire income only on two goods X and Y a consumer finds that, MUz/Pz y/PyExplain how will the consumed react.

• Once the marginal utility becomes negative, the consumer will stop consuming the good.Marginal Utility is a fundamental concept in economics.
• Total utility and marginal utility are closely linked concepts in economics.
• MU can also be calculated when the change in units consumed is more than one.
• The budget line is a graphical representation of all the bundles that cost the same as the consumer’s income.
• Which statement best explains the “subjective” nature of utility in economics?

Marginal utility increases with increase in consumption. Explain the relationship between ‘total utility’ and ‘marginal utility’. Shaalaa.com has the Maharashtra State Board Mathematics Economics English 12 Standard HSC Maharashtra State Board solutions in a manner that help students grasp basic concepts better and faster.

Distinguish Between: Total Utility and Marginal Utility – Economics

It can be seen from the above schedule that total utility increases at a diminishing rate, which leads to fall in marginal utility. Question 4.After a point of satiety, any additional consumption of commodity results into –(a) negative MU(b) diminishing TU(c) disutility(d) maximum TU Aggregate of utility derived by the consumer from all units of a commodity consumed − As the table illustrates, as the quantity consumed increases, total utility initially rises rapidly, but then at a decreasing rate. Marginal utility, on the other hand, declines steadily, eventually becoming negative.

Revision Notes Links for Class 12 Economics

Thus, four utils are more significant than three utils, three utils are more significant than two utils, and so on. Explain any four exceptions of the law of Diminishing marginal utility. Giving reasons, state why the following two conditions must be satisfied when a consumer is in equilibrium.

(Q8) When onion price hits hard, the poor man simply avoids buying it. Explain the Economics of it using utility analysis. (Q5) If MU of rupees increases, the quantity demanded of the commodity will also increase. (Q3) Unless MUM is assumed to be constant, equilibrium of the consumer cannot be specified.

Point F lying on IC2 represents more units of Y, i.e., OY, as well as more units of X, i.e. OX2.The consumer gets greater satisfaction from a larger pieces of goods than from a smaller amount. Hence, point F shall be on a higher IC and shall be more preferable to point E, lying on lower IC.

When two things are consumed concurrently, satisfaction can be compared at best. Due to this drawback, utility analysis is shown to have minimal application in describing consumer equilibrium. TU increases with an increase in the consumption of a commodity and as long as MU is positive. Till 4 burgers, TU increases at a diminishing rate as MU from each successive burger diminishes. Marginal Utility is the utility obtained from the last unit of a product or service. It refers to the additional utility on account of the consumption of an additional unit of a commodity.

It explains by how much the quantity demanded will change in response to a price change. Why is a consumer’s equilibrium achieved where the budget line is tangent to an indifference curve? A movement along the demand curve occurs due to a change in the commodity’s own price, leading to an ‘expansion’ or ‘contraction’ of demand. A budget set includes all possible combinations (bundles) of two goods that a consumer can afford with their given income at prevailing market prices.