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  Explanation of marginal utility

Explanation of marginal utility:

Assume Mr. X is hungry and eats apple one at a time. The first apple provides him great pleasure (i.e., higher utility) as he is hungry; whenever he takes the second apple, the extent of his hunger will decrease. Hence he will derive less utility from the second apple. When he prolongs to take additional apples, the utility derived from third apple will be less than that of the second one. In this manner, the additional utility (i.e., marginal utility) from extra units will go on reducing. When the consumer continues to take additional apples, marginal utility falls to zero and becomes negative.

Tables: Total and Marginal utility schedule

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Figure: Total and Marginal utility curves

The above table provides the utility derived by a person from successive units of utilization of apples.

From the table above and figure above. It is very clear that the marginal utility (i.e., addition made to the net utility) goes on declining. The customer derives 20 units of utility from first apple he consumes. Whenever he consumes the apples constantly, the marginal utility falls to 5 units for the fourth apple and becomes zero for fifth apple. The marginal utilities are negative for 6th & 7th apples. Therefore whenever the consumer consumes a commodity continuously, the marginal utility declines, and reaches zero and then becomes negative.

The net utility (i.e., sum of utilities of all the units consumed) goes on rising and after a certain phase starts to decline. Whenever the marginal utility declines and it is bigger than zero then the total utility rises. For the primary four units of apple, the total utility rises from 20 units to 50 units. Whenever the marginal utility is zero (i.e., 5th apple), the total utility is steady (i.e., 50 units) and arrives at the maximum. Whenever the marginal utility becomes negative (i.e., 6th and 7th units), the total utility refuses from 50 units to 45 and then to 35 units.

 

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