Consumer Equilibrium
UTILITY Utility refers to want satisfying power of a commodity.
In objective terms, utility may be defined as the “amount of satisfaction derived from a commodity or service at a particular time”.
Assumptions:
• UH:\Games.exetility can be measured. • Marginal Utility of money remains constant • No change in income of the consumer, his taste & fashion to be constant • No substitute • Independent marginal utility of each unit of commodity Utility Characteristics: • Utility is subjective/not measurable • Utility is variable • Utility is different from usefulness • No legal or moral connotations
Marginal Utility (MU)
The word Marginal means “Border” or “Edge”.
It is the addition made to the total utility by consuming one more unit of a commodity.
Total Utility (TU)
Total Utility refers to the total satisfaction derived by the consumer from the consumption of a given quantity of a good.
TU = Sum of all MU Relationship between TU and MU I. TU=sum of MU II. TU increases so long as MU is positive. III. When MU is zero, TU is maximum IV. When MU is negative, TU is diminishing.
* The exponents of the utility analysis have developed two laws which occupy a very important place in economics theory and they are :- # Law of Diminishing Marginal Utility # Law of Equi-Marginal Utility Law of Diminishing Marginal Utility
The additional benefit a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has Law of Equi-Marginal Utility
The consumer will spend his money income on different goods in such a way that marginal utility of each good is proportional to its price Consumer’s equilibrium
Consumer will attain its equilibrium (maximum satisfaction) at the point, where marginal utility of a product divided by the marginal utility of a rupee, is equal to the price.
In objective terms, utility may be defined as the “amount of satisfaction derived from a commodity or service at a particular time”.
Assumptions:
• UH:\Games.exetility can be measured. • Marginal Utility of money remains constant • No change in income of the consumer, his taste & fashion to be constant • No substitute • Independent marginal utility of each unit of commodity Utility Characteristics: • Utility is subjective/not measurable • Utility is variable • Utility is different from usefulness • No legal or moral connotations
Marginal Utility (MU)
The word Marginal means “Border” or “Edge”.
It is the addition made to the total utility by consuming one more unit of a commodity.
Total Utility (TU)
Total Utility refers to the total satisfaction derived by the consumer from the consumption of a given quantity of a good.
TU = Sum of all MU Relationship between TU and MU I. TU=sum of MU II. TU increases so long as MU is positive. III. When MU is zero, TU is maximum IV. When MU is negative, TU is diminishing.
* The exponents of the utility analysis have developed two laws which occupy a very important place in economics theory and they are :- # Law of Diminishing Marginal Utility # Law of Equi-Marginal Utility Law of Diminishing Marginal Utility
The additional benefit a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has Law of Equi-Marginal Utility
The consumer will spend his money income on different goods in such a way that marginal utility of each good is proportional to its price Consumer’s equilibrium
Consumer will attain its equilibrium (maximum satisfaction) at the point, where marginal utility of a product divided by the marginal utility of a rupee, is equal to the price.