5.3: Relationship between Total Utility and Marginal Utility

Total Utility

Total utility, or TU, is the overall utility received from the consumption of all units of a product. For example, Nicole eats the first slice of pizza. It gives her immense satisfaction. This is her TU from the first slice. She gets some satisfaction from the second slice. The sum of utilities derived from the first and second slices gives TU from two slices of pizza. TU is the cumulative satisfaction from all consumed slices.

Marginal Utility

Marginal utility, or MU, measures the additional satisfaction received from consuming one more unit of a product. When Nicole eats the second slice of pizza, the additional satisfaction she gets from eating this second slice is its MU. When Nicole eats the third slice of pizza, the additional satisfaction she gets from this slice is its MU.

Relation between Total Utility and Marginal Utility

MU is represented by the slope of the TU curve. The TU curve initially rises, reflecting the positive MU. At the point where Nicole doesn't derive satisfaction from an additional slice, the TU curve flattens, indicating a zero MU. Beyond this point, her total satisfaction decreases. From here, the TU curve declines, representing a negative MU.

Total utility, or TU, is the overall satisfaction with the consumption of all units of a product. Consider the utility that John gets from eating pizzas for lunch.

Graphically, the x-axis shows the quantity of pizza John consumes, and the y-axis represents Total Utility.

Marginal utility, or MU, measures the additional satisfaction a person gets from consuming one more unit of a product. It is calculated by dividing the change in Total Utility by the change in quantity consumed of the product.

Also, the slope of the Total Utility curve gives the Marginal Utility curve. The Marginal Utility curve is drawn on a separate graph.

Total Utility and Marginal Utility are closely related. Initially, as John eats pizza, Total Utility rises up to a point. It declines after that. As long as Marginal Utility is positive, Total Utility increases.

The point at which the Marginal Utility curve intersects the x-axis, that is, where Marginal Utility equals zero, indicates the point at which Total Utility is maximized.

Beyond this point, as Marginal Utility becomes negative, Total Utility decreases.