Answer the following questions: 1. Explain the relationship between TU and MU.

Answer the following questions:

1. Explain the relationship between TU and MU.

ANSWER:

The following points highlight the relationship between TU (Total Utility) and MU (Marginal Utility).

i. As more and more units of the commodity are consumed, the marginal utility derived from the consumption of each additional unit of the commodity tends to fall. With the consumption of the successive units, the marginal utility becomes zero and, consequently, becomes negative.

ii. As long as MU, derived from the consumption of additional units of the commodity, is positive, TU continues to rise.

iii. When TU reaches the maximum point, MU becomes zero.

iv. When TU starts falling, MU becomes negative.

v. MU is derived from TU as:

   MUn = TUn − TUn −1

vi. TU is defined as the summation of all the marginal utility values, given as:

   TUn = MU1+MU2+ MU3+..............+MUn = ∑MU.

Diagrammatically, the relationship between the TU and MU can be expressed as follows.