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Unit-3: Consumer Theory–Cardinal Utility Analysis

1. Total Utility Notes

It is the aggregation of utilities obtained from the consumption of two different units of a commodity. In
other words, total utility is the measurement of satisfaction derived from consuming quantity of some
goods. It is the function of the quantity of a commodity consumed and is expressed as

TU = f(Qx)
x

[The total value of this is read as –X (TU ), X- commodity quantity (Q ) is a function of (f).]
x x
In the words of Leftwitch, “Total Utility refers to the entire amount of satisfaction obtained from
consuming various quantities of a commodity.” Assume that you eat 8 Rasagullas at a sitting. The
aggregation of the utilities obtained from the 8 Rasagullas will be called Total Utility.

2. Marginal Utility

The concept of Marginal utility was put forward by the eminent economist named Jevons. The other
name for Marginal utility is additional utility. The marginal utility is the gain (or loss) from an increase
(or decrease) in the consumption of that goods or service. Assuming that by the consumption of
the 1 chapatti you get 15 units of utility while consuming the 2nd one your total units goes upto 25.
This means that the consumption of the 2nd chapatti added only 10 units to the total utility. Thus the
marginal utility of the second chapatti is only 10 units.
According to Lipsey, “Marginal utility is the addition made to the total utility by consuming one
more unit of commodity.”
_____
MU = TU – TU Or MU = ∆TU

nth n n – 1 DQ
(Here MU nth = nth marginal utility of unit; TU = n the total value of units; TU n–1 = n – 1 the total utility
n
of the unit ∆TU = total utility; ∆Q = change in the amount of object)
Marginal Utility can be (1) positive (2) Zero and (3) Negative.
(i) Positive Marginal Utility: Positive marginal utility is the change in total utility by the
consumption of an additional unit of commodity. Suppose to satisfy your hunger you eat
chappatis, from the first one you get 8 units and while from the second one you get 6 units.
Altogether you have got 8 + 6 = 14 units. Thus, by taking the additional units of chapattis, total
utility goes on increasing. The marginal utility which you derived from the second chapattis is
known as positive marginal utility.
(ii) Zero marginal utility: When the consumption of extra units of items has no change on the
total utility, it means that the marginal unity of the additional unit is Zero. At this level the
consumption utility will be maximum. So as far as the satisfaction of the consumer is concerned,
it will be his saturated point. Suppose 4 chapattis of bread yield total utility of 20 units and
the consumption of 5th chapatti does not make any change in the total utility and the utility
remains 20, that means the marginal utility of the 5th one is Zero.
(iii) Negative marginal utility: When the consumption of every extra unit decreases the utility
derived from it, then it is known as negative marginal utility. After receiving the saturation
point, after taking 5 chapattis, if the consumer is forced to take the number 6 chapatti, he may
suffer from indigestion. Therefore, the total utility of the 6 chapattis may come down to 18 units,
which signifies that the marginal utility is negative 2 i.e (18 – 20) = –2. Hence –2 is the negative
marginal utility.

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