Chapter 20, Problem 20.1LO

To determine

The difference between total utility and marginal utility.

Explanation of Solution

Total utility refers to the total satisfaction a person derives from the consumption of various units of a commodity, whereas, marginal utility refers to the additional satisfaction (in utils) a person receives when he consumes an additional unit of the same commodity.

Marginal utility first rises and then declines due to the working of the law of diminishing marginal utility. Which states that as a person goes on consuming more and more units of the same commodity, his satisfaction increases and then starts declining. This is why the marginal utility first rises and then declines.

Economics Concept Introduction

Concept Introduction:

Law of Diminishing Marginal Utility - States that when a person goes on consuming the same commodity without a time gap, the satisfaction that he derives from every additional unity of the commodity keeps falling.

Marginal Utility- It refers to the additional utility a person derives from an additional unit of consumption.

Total utility- It refers to the total satisfaction (in utils) a person as derived from the consumption of over all units of a commodity.