Relationship Between TU, MU and AU

 1. Explain Graphically the relationship of TU, AU and MU? 

Ans. There are three types of Utility:

• Total Utility (TV)

• Marginal Utility (MU)

• Average Utility (AU)

•Total Utility : The Utility which a consumer obtains by Consuming all units of a commodity Particular Period of time is called total utility (TU).

TU = ( Utility derived from unit 1 + Utility derived from unit 2+........Utility derived from unitn)

TU = (Un + Un₂ +........Unn)

•Marginal Utility: The utility which consumer obtains by Consuming extra unit of a commodity is called marginal utility (MU). Marginal utility is the change in total utility due to change in unit of consumption of commodity.

Margial Utility = change in total utility / change in whit consumption of commodity.

•Average Utility : AU as the name by total utility divided suggests it is the units of commodity Consumed.

AU= Total Utility / units of Commodity Consumed.

It is satisfaction enjoyed by the Consumer from per unit Commodity Consumed.

Relationship of Total Utility (TU), Average Utility (AU) and Marginal Utility (MU) :-

The relation among total Utility, Average Utility and Marginal Utility can be understood by a careful study of table 1.1 and Fig 1.1. It is clear from this table

and figure that initially the total Utility Curve slopes upwards to the right.

This indicates that the total utility will rise with Consumption of additional units of the commodity. However, the increase in toted utility is not constant, but fulls steadily. In other words, the total Utility rises at a falling rate. This is shown by corres -Ponding downward negative slope of the marginal utility curve. In the present example, this happens upto 6 units of the Commodity.

Table 1.1: Relationship among Total Utility (TU), Average

Utility (AU) and Marginal Utility (in Rupees)

When the total Utility reaches its maximum value, marginal utility becomes Zexo. Before this point, though marginal Utility fulls, it always remains positive. In our example, this happens when the consumer Con- Sumes Sixth unit of the Commodity. It is called the point of Sadiety. The total utility stops rising at this stage.

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When Consumption is expanded beyond the point of Sectiety, the total utility starts falling because the marginal utility derived from the corresponding level of consumption. This has been shown in Fig. 1.2.