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Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?
- a)Rs. 2
- b)Rs. 2.5
- c)Rs. 3
- d)Rs. 4
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
Total utility derived form the consumption of a commodity is equal to ...
Calculation of Total Utility:
- Total utility = Rs. 5
- This means that the consumer has derived a total satisfaction worth Rs. 5 from the consumption of the commodity.
Calculation of Marginal Utility:
- Marginal utility = 1
- This means that the consumer derives an additional satisfaction of 1 unit from the consumption of each additional unit of the commodity.
Calculation of Consumer Surplus:
- Consumer surplus is the difference between the total amount that the consumer is willing to pay for a commodity and the actual amount paid by the consumer.
- In this case, the consumer has bought 3 units of the commodity.
- The amount that the consumer is willing to pay for the first unit is equal to the marginal utility of the first unit, which is 1.
- Similarly, the amount that the consumer is willing to pay for the second unit is also equal to 1.
- For the third unit, the consumer is willing to pay 1 more unit of satisfaction, which is equal to the marginal utility of the third unit, i.e., 1.
- Therefore, the total amount that the consumer is willing to pay for the 3 units of the commodity is equal to 3.
- However, the consumer has only paid Rs. 3 for the 3 units.
- Hence, the consumer surplus is equal to the difference between the amount that the consumer is willing to pay and the actual amount paid, which is Rs. 2.
Therefore, the correct answer is option 'A', i.e., Rs. 2.
- Total utility = Rs. 5
- This means that the consumer has derived a total satisfaction worth Rs. 5 from the consumption of the commodity.
Calculation of Marginal Utility:
- Marginal utility = 1
- This means that the consumer derives an additional satisfaction of 1 unit from the consumption of each additional unit of the commodity.
Calculation of Consumer Surplus:
- Consumer surplus is the difference between the total amount that the consumer is willing to pay for a commodity and the actual amount paid by the consumer.
- In this case, the consumer has bought 3 units of the commodity.
- The amount that the consumer is willing to pay for the first unit is equal to the marginal utility of the first unit, which is 1.
- Similarly, the amount that the consumer is willing to pay for the second unit is also equal to 1.
- For the third unit, the consumer is willing to pay 1 more unit of satisfaction, which is equal to the marginal utility of the third unit, i.e., 1.
- Therefore, the total amount that the consumer is willing to pay for the 3 units of the commodity is equal to 3.
- However, the consumer has only paid Rs. 3 for the 3 units.
- Hence, the consumer surplus is equal to the difference between the amount that the consumer is willing to pay and the actual amount paid, which is Rs. 2.
Therefore, the correct answer is option 'A', i.e., Rs. 2.
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Community Answer
Total utility derived form the consumption of a commodity is equal to ...
Calculation of Total Utility and Marginal Utility:
Total Utility (TU) = Rs. 5
Marginal Utility (MU) = 1
Calculation of Consumer Surplus:
Consumer Surplus (CS) = Total Utility - Total Expenditure
Total Expenditure (TE) = Quantity of Commodity x Price of Commodity
Given that the consumer has bought 3 units of the commodity, but the price of the commodity is not given. Therefore, we cannot calculate the total expenditure.
However, we can calculate the maximum price that the consumer is willing to pay for the commodity based on the marginal utility.
Maximum Price (MP) = Marginal Utility
Therefore, the maximum price that the consumer is willing to pay for the commodity is Rs. 1.
Now, we can calculate the total expenditure and the consumer surplus based on this maximum price.
Total Expenditure (TE) = Quantity of Commodity x Price of Commodity = 3 x 1 = Rs. 3
Consumer Surplus (CS) = Total Utility - Total Expenditure = Rs. 5 - Rs. 3 = Rs. 2
Therefore, the consumer surplus is Rs. 2.
Answer: (a) Rs. 2
Total Utility (TU) = Rs. 5
Marginal Utility (MU) = 1
Calculation of Consumer Surplus:
Consumer Surplus (CS) = Total Utility - Total Expenditure
Total Expenditure (TE) = Quantity of Commodity x Price of Commodity
Given that the consumer has bought 3 units of the commodity, but the price of the commodity is not given. Therefore, we cannot calculate the total expenditure.
However, we can calculate the maximum price that the consumer is willing to pay for the commodity based on the marginal utility.
Maximum Price (MP) = Marginal Utility
Therefore, the maximum price that the consumer is willing to pay for the commodity is Rs. 1.
Now, we can calculate the total expenditure and the consumer surplus based on this maximum price.
Total Expenditure (TE) = Quantity of Commodity x Price of Commodity = 3 x 1 = Rs. 3
Consumer Surplus (CS) = Total Utility - Total Expenditure = Rs. 5 - Rs. 3 = Rs. 2
Therefore, the consumer surplus is Rs. 2.
Answer: (a) Rs. 2
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Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?a)Rs. 2b)Rs. 2.5c)Rs. 3d)Rs. 4Correct answer is option 'A'. Can you explain this answer?
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Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?a)Rs. 2b)Rs. 2.5c)Rs. 3d)Rs. 4Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?a)Rs. 2b)Rs. 2.5c)Rs. 3d)Rs. 4Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?a)Rs. 2b)Rs. 2.5c)Rs. 3d)Rs. 4Correct answer is option 'A'. Can you explain this answer?.
Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?a)Rs. 2b)Rs. 2.5c)Rs. 3d)Rs. 4Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?a)Rs. 2b)Rs. 2.5c)Rs. 3d)Rs. 4Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Total utility derived form the consumption of a commodity is equal to Rs. 5. Marginal utility is equal to 1 and consumer has bought 3 units. What will be his consumer surplus?a)Rs. 2b)Rs. 2.5c)Rs. 3d)Rs. 4Correct answer is option 'A'. Can you explain this answer?.
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