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If total utility of a commodity is 5 and marginal utility is 1, a person consumes 3 units. What is the consumer surplus?

  • a)
    4

  • b)
    3

  • c)
    6

  • d)
    2

Correct answer is option 'D'. Can you explain this answer?
Verified Answer
If total utility of a commodity is 5 and marginal utility is 1, a pers...
If you assume that the law of diminishing marginal utility operates and the Marginal utility at the last unit of consumption(i.e., 3rd unit) is 1, then for three units the total utility is 5(given)

Under the cardinal utility approach MU=P=1 ( assuming marginal utility of money is 1),then consumer surplus = TU - TC for the three units consumed.

Thus, CS=5–3=2.
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Most Upvoted Answer
If total utility of a commodity is 5 and marginal utility is 1, a pers...
Total utility - person consumes × marginal utility =consumer surplus so (5-3×1=2).
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Community Answer
If total utility of a commodity is 5 and marginal utility is 1, a pers...
Consumer surplus refers to the difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay. It represents the additional benefit that a consumer receives from a purchase, above and beyond what they paid for it.

In this case, the total utility of the commodity is given as 5, indicating the overall satisfaction or benefit that the consumer derives from consuming the commodity. The marginal utility, on the other hand, represents the additional utility or satisfaction derived from consuming an additional unit of the commodity.

Given that the marginal utility is 1, this means that consuming one more unit of the commodity provides an additional utility of 1. Therefore, the consumer consumes 3 units of the commodity, resulting in a total utility of 5.

To calculate the consumer surplus, we need to determine the difference between the maximum price the consumer is willing to pay and the actual price they pay. However, the question does not provide any information about the prices involved. Hence, we cannot calculate the consumer surplus with the given information.

Therefore, the answer cannot be determined based on the information provided.
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If total utility of a commodity is 5 and marginal utility is 1, a person consumes 3 units. What is the consumer surplus?a)4b)3c)6d)2Correct answer is option 'D'. Can you explain this answer?
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