Write a short note on Relationship between Total Utility and Marginal Utility.
Marginal utility derived from the , various units of a commodity and its total utility are interrelated.
- The point where marginal utility becomes zero, is called the point of saliety . Before this point is reached though marginal utility tends to decline, it always remains positive. Total utility in this situation increases, the rate of increase, however declines.
- As the point of saliety is reached, marginal utility falls to zero and total utility stops rising. At this stage total utility is maximum.
- If consumption is expanded beyond the point of satiety, MU turns negative and TU declines. At this stage, TU declines at an increasing rate.
The total utility curve as well as the marginal utility .curve starts from the same point A. The output where Total Utility (TU) curve achieves its maximum point is the point where MU Cuts the X-axis. As the consumer expands his consumption beyond this point, his total utility declines and thus marginal utility becomes negative. Initially the TU uses upward from left to right. Once it reaches the point of saliety it begins sloping downward to the right. Slope of this curve at each point indicates the marginal utility derived from the corresponding level of consumption.