State the following statements are True or False:
3. MU and TU are equal at the initial stage.
ANSWER:
3) MU and TU are equal at the initial stage. -True
Explanation:
Total utility (TU) refers to the aggregate utility, or the summation of utility, derived from the consumption of all the units of a commodity.
Algebraically, TUn= MU1+ MU2+ MU3+.............. + MUn= ∑MU
At the initial stage i.e. at the first unit of consumption, Marginal Utility (MU) and Total Utility (TU) are equal. That is, MU = TU.
Number of Units Consumed of Commodity (X)
|
Total Utility (TU) (utils)
|
Marginal Utility (MU)
MUn = TUn − TUn − 1(utils)
|
1
|
50*
|
50 − 0 = 50*
|
2
|
100
|
100 − 50 = 50
|
3
|
130
|
130 − 100 = 30
|
* TU and MU are equal at the initial phase.