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What will be the total utility derived from the consumption of a commodity by a consumer will be if marginal utility is zero?
Wiki User
∙ 12y ago
i don't know the answer. i think it may be minimum or maximum.
Wiki User
∙ 12y ago
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Total utility derived from consumption of a commodity by a consumer will be?
Will Be maximum when its marginal utility is Zero.
What is cardinalist approach?
The cardinalist school or the marginalist approach is based on the arguement that the satisfaction derived from the consumption of any commodity by a consumer can be measured in specific units of utility called as utils
The law of diminishing marginal utility says that as you consume more of something the satisfaction that you get from each additional unit .?
Auuumptions:This law is based on following assumptions and this law is applicable only if these assumptions are true. There are following:1: Continuous use: It is assumed that the unit of commodity should be used continuously. If there is interval between the consumption of the same units then this law will not applicable.2: Reasonable units: It is also assumed that the units of commodity which are used should be suitable and reasonable. if the units are too small, then law will not be operate.3: Nature of commodity: It is also assumed that the income of the consumer should not change. Otherwise this law will not operate.4: No Change in fashion: It is also assumed that there should be not change in fashion. If there is a sudden change in fashion then this law will not be operate.5: No change in prices of substitutes: There should be no change in prices of substitutes. If the price of substitute change then demand of the commodity increases and this law will not be true.6: No change in taste: There should be no change in the taste of consumer. For example if a consumer develops the taste of wine, then every next unit of wine increase marginal utility, which is against of our law.7: No change in weather: Another assumption is that the weather will be remains unchanged. If weather changed then demand of certain commodity changes and this law will not be operated.8: Rare Collection: The law does not apply in the case of rare collections. If a person has a hobby of collecting rare coins, the larger number he collects the greater will be his happiness, whereas according to this law it should be less and less,
How can the demand curve be derived using the marginal utility theory?
Marginal utility is the key concept underline demand .The height of a demand curve reflects marginal utility.The marginal utility curve resembles the demand curve. So, it is through the marginal utility we get the demand curve.
Where is business demand often derived?
The nature of the demand for products differs from consumer demand because it is often derived from consumer demand.
Total utility derived from consumption of a commodity by a consumer will be?
Will Be maximum when its marginal utility is Zero.
How diminishing law guides consumer to get equilibrium?
A consumer buys/consumes a product only if marginal utility derived from it is more than marginal utility of money. As he continues consuming the marginal utility derived from every additional unit goes on diminishing but marginal utility of money remains constant. Both utilities match at a place i.e; where marginal utility of product becomes equal to marginal utility of money the consumer stops consumption thus equilibrium is struck.
What is cardinalist approach?
The cardinalist school or the marginalist approach is based on the arguement that the satisfaction derived from the consumption of any commodity by a consumer can be measured in specific units of utility called as utils
What is average utility?
Average Utility is defined as the utility derived (or obttained) from the use of one unit of commodity. It is calculated by dividing the total number of utils by the number of units commodity is used by the consumer.
The law of diminishing marginal utility says that as you consume more of something the satisfaction that you get from each additional unit .?
Auuumptions:This law is based on following assumptions and this law is applicable only if these assumptions are true. There are following:1: Continuous use: It is assumed that the unit of commodity should be used continuously. If there is interval between the consumption of the same units then this law will not applicable.2: Reasonable units: It is also assumed that the units of commodity which are used should be suitable and reasonable. if the units are too small, then law will not be operate.3: Nature of commodity: It is also assumed that the income of the consumer should not change. Otherwise this law will not operate.4: No Change in fashion: It is also assumed that there should be not change in fashion. If there is a sudden change in fashion then this law will not be operate.5: No change in prices of substitutes: There should be no change in prices of substitutes. If the price of substitute change then demand of the commodity increases and this law will not be true.6: No change in taste: There should be no change in the taste of consumer. For example if a consumer develops the taste of wine, then every next unit of wine increase marginal utility, which is against of our law.7: No change in weather: Another assumption is that the weather will be remains unchanged. If weather changed then demand of certain commodity changes and this law will not be operated.8: Rare Collection: The law does not apply in the case of rare collections. If a person has a hobby of collecting rare coins, the larger number he collects the greater will be his happiness, whereas according to this law it should be less and less,
What is meant by utility and what are the five economic utilities?
we can look utility in two angles product angle it is wants and need satisfying property of c ommodity. consumer angle it is psychologiccal happiness ,pleasure,derived by consumer after consumption.
How can the demand curve be derived using the marginal utility theory?
Marginal utility is the key concept underline demand .The height of a demand curve reflects marginal utility.The marginal utility curve resembles the demand curve. So, it is through the marginal utility we get the demand curve.
Where is business demand often derived?
The nature of the demand for products differs from consumer demand because it is often derived from consumer demand.
What is this called when a buyer purchases a good each additional item type is less satisfying than the earlier one?
This is known as diminishing marginal utility. It is the principle that the satisfaction or utility derived from consuming each additional unit of a good decreases as more of it is consumed. This concept is a fundamental principle in economics and helps explain consumer behavior.
Examples of law diminishing marginal utility and indifference curve?
Consumers Equilibrium through Law of EquiMarginal Utility The Law of Equi-Marginal Utility is an extension to the law of diminishing marginal utility. The principle of equi-marginal utility explains the behavior of a consumer in distributing his limited income among various goods and services. This law states that how a consumer allocates his money income between various goods so as to obtain maximum satisfaction. The principle of equi-marginal utility is based on the following assumptions: (a) The wants of a consumer remain unchanged. (c) The prices of all goods are given and known to a consumer. (d) He is one of the many buyers in the sense that he is powerless to alter the market price. (e) He can spend his income in small amounts. (f) He acts rationally in the sense that he want maximum satisfaction (g) Utility is measured cardinally. This means that utility, or use of a good, can be expressed in terms of "units" or "utils". This utility is not only comparable but also quantifiable. Suppose there are two goods 'x' and 'y' on which the consumer has to spend his given income. The consumer's behavior is based on two factors: (a) Marginal Utilities of goods 'x' and 'y' (b) The prices of goods 'x' and 'y' The consumer is in equilibrium position when marginal utility of money expenditure on each good is the same. The Law of Equi-Marginal Utility states that the consumer will distribute his money income in such a way that the utility derived from the last rupee spent on each good is equal. The consumer will spend his money income in such a way that marginal utility of each good is proportional to its rupee. The consumer is in equilibrium in respect of the purchases of goods 'x' and 'y' when: MUx = MUy Where MU is Marginal Utility and P equals Price If MUx / Px and MUy / Py are not equal and MUx / Px is greater than MUy / Py, then the consumer will substitute good 'x' for good 'y'. As a result the marginal utility of good 'x' will fall. The consumer will continue substituting good 'x' for good 'y' till MUx/Px = MUy/Py where the consumer will be in equilibrium. Thus this is also known as the law of substitution. Let us illustrate the law of Equi-Marginal Utility with the help of a table: The side table shows marginal utilities of goods 'x' and 'y'. Let us suppose that the price of goods 'x' and 'y' are Rs. 2/- and Rs.3/-. Then MUx/Px & MUy/Py are as follows: With a given income a rupee has certain utility to him. This is the Marginal Utility for him. Now the consumer will go on purchasing goods till the marginal utility of expenditure on each good becomes equal to the marginal utility of money to him. Thus the consumer will be in equilibrium at a point where: MUx = MUy = MUm MUm refers to Marginal Utility of Money Let us suppose that the given income of a consumer is Rs.19/-. With the given income suppose the marginal utility of money is constant at "Rs. 1 = 6 utils". By looking at the above table, it is clear that MUx/Px = 6 utils when he buys 5 units of good 'x' and MUy/Py = 6 utils when he purchases 3 units of good 'y'. Therefore the consumer will be in equilibrium when he is buying 5 units of good 'x' and 3 units of good 'y' and will be spending Rs.19/- on them. This law can be explained with the help of the following diagram: In the above diagram marginal utility curves of good 'x' & 'y' slope downwards. Marginal Utility of Money is confident at OM. MUx/Px = OM when OK amount of good 'x' is purchases and MUy/Py = OM when OH amount of good 'y' is purchased. Thus the consumer will be in equilibrium when he purchases OK amount of good 'x' and OH amount of good 'y' and then: This law is based on the assumption that utility can be cardinally measurable. But in actual practices it cannot be measured in such cardinal numbers. It is also assumed that marginal utility of money is constant. But this is not true because when the quantity of money increases, its marginal utility will diminish. This law is not applicable in the case of indivisible goods like TV sets, refrigerators, etc. Normally a person will buy only a single unit of such goods. Hence it is ridiculous to prepare an individual marginal utility schedule for such goods. However, this principle is useful to a consumer to obtain maximum satisfaction and it is also helpful to a producer to get maximum profits. Awais
Intuitive derivation of individual demand curve using marginal utility?
how is a demand curve derived from individual demand curve ?
What is equi marginal?
This Theory was propounded by H.H Gossen and called Gossen second law and developed by Alfred Marshall and all the credit is given to Alfred Marshall. This theory states that a retoinal consumer spend his total budget between among the goods he will derived the satisfaction from the additional goods.
