The total utility divided by the number of units consumed is known as?a)Average utilityb)Total utilityc)Marginal utilityd)None of aboveCorrect answer is option 'A'. Can you explain this answer?

Question

Answer

Average utility because(iii) Average Utility:
Average Utility is that utility in which the total unit of consumption of goods is divided by number of Total Units. The Quotient is known as Average Utility.

Answer

Average utility is obtained by dividing the total utility by number of units consumed.

Answer

Total utility is the overall satisfaction or happiness that a consumer derives from consuming a certain quantity of a good or service. It is the sum of the individual utilities obtained from each unit of the good or service consumed.

On the other hand, average utility is the total utility divided by the number of units consumed. It represents the amount of utility that a consumer derives, on average, from each unit of the good or service consumed. In other words, it measures the satisfaction obtained from consuming one additional unit of the good or service.

To understand this concept better, let's break it down into the following points:

1. Total Utility:
Total utility is the cumulative satisfaction or happiness a consumer experiences from consuming a certain quantity of a good or service. It is the sum of the individual utilities obtained from each unit consumed. As the consumer consumes more units of the good or service, the total utility generally increases, but at a decreasing rate.

2. Marginal Utility:
Marginal utility refers to the additional utility or satisfaction obtained from consuming one additional unit of a good or service. It measures the change in total utility resulting from the consumption of an extra unit. Marginal utility typically diminishes as more units are consumed, reflecting the law of diminishing marginal utility.

3. Average Utility:
Average utility is the total utility divided by the number of units consumed. It represents the average satisfaction obtained from each unit of the good or service consumed. By calculating the average utility, we can assess the overall level of satisfaction per unit consumed.

4. Importance of Average Utility:
Average utility helps in understanding the efficiency of consumption. If the average utility is positive, it indicates that each additional unit consumed contributes positively to the overall satisfaction. However, if the average utility is negative, it means that consuming additional units decreases the overall satisfaction.

In conclusion, the total utility divided by the number of units consumed is known as average utility. It provides insights into the average satisfaction obtained from each unit consumed and helps in analyzing the efficiency of consumption.

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