What is Marginal Utility Analysis - Theory of Consumer Behaviour, CBSE Class 12 Economics Video Lecture

marginal utility analysis now I've
already told you that we are studying as
to how a consumer spends his income on
goods to get maximum utility or maximum
satisfaction a consumer tries to
maximize his utility level or maximize
his satisfaction level within the reach
of his income now to understand this in
a better way we need to understand what
the marginal utility is and marginal
utility is the additional utility
derived from consumption of additional
unit of a commodity it is the additional
utility or the additional satisfaction
you derive from consuming one more unit
of a commodity let's say you are
consuming icecream you derive some
satisfaction level when the first unit
you consume again when you consume the
second unit you still derive some
satisfaction level when you consume the
third you again derive some amount of
satisfaction
this goes on continuing till you are
done with having the ice-cream so
marginal utility is the utility derived
from one more c'mon let's say you had
two units you had two units of ice-cream
status you had two ice creams and the
utility that you derived from it is 35
from the first you derive 20 and from
the second you derive 15 now if you
consume the third unit you are consuming
the third unit and if you derive a
utility of 10 from it we can say that
the marginal utility is 10 for the third
unit Marv
utility for the first unit was 20
because you derived a satisfaction level
of 20 in it marginal utility in the
second was 15 because you derived only
15 from the second level of you derived
a satisfaction level of 15 from the
second unit of consumption and finally
when you consume the third unit you
derive a satisfaction level of 10 now
tell me when you consume the fourth unit
won't you derive satisfaction from it
yes you will so marginal utility from
the fourth commodity or the fourth unit
of the commodity that is the ice-cream
would be 5 so marginal utility is extra
utility derived from one extra unit of
consumption so what is total utility
total utility is nothing but the sum of
all the utility derived in total
consumption that is when you consume the
first commodity you derive a
satisfaction level of 20 so we can say
the utility or the total utility derived
from one unit of consumption is 20 when
you consume the second ice-cream you
derive a utility of 15 from the second
ice-cream but in total now you have
derived 35 a satisfaction level of 35 20
from the first and 15 from the second
when you consume the third ice-cream you
derived a satisfaction level of 10 but
what would be the total utility that you
have derived till the end of third
consumption it is 45 20 from the first
consumption 15 from the
ten from the third and we add all these
three satisfaction levels we get a
satisfaction level of 45 likewise when
you consume the fourth commodity and you
get a utility of five you see you will
simply add this to your earlier total
utility so now your total utility would
be fifty forty five plus five will
become fifty so total utility is the sum
of utility derived from all the units of
commodity consumed total utility derived
that is the sum of all the utility
derived from consumption of all the
units of the commodity now how do we
calculate total utility total utility is
nothing but summation of all marginal
utilities here in this example we've
done nothing but we've added all the
individual marginal utilities to derive
total utility we've added all the
marginal utilities to get the total
utility so total utility is summation mu
naught to sum up all marginal utilities
and how do we calculate marginal utility
marginal utility can be calculated as
total utility derived from the last
consumption minus the total utility
derived from the second-last consumption
that is tu n minus 2 u n minus 1 this
will be assuming that you have consumed
n units of the commodity icecream in our
case so when you consume n ice creams
the total utility derived from n ice
creams minus the total utility derived
from n minus 1 ice creams this would be
marginal utility so in our case if we
consider only total utility from the
first commodity we are deriving 20 from
the second 35 third 45 450 now if I want
to calculate marginal utility from total
utility only I can do it by minus in the
second last utility derived from the
last utility let's say I want to know
what does the marginal utility when I
consume the pot unit mu at fourth unit
mu at fourth unit will be 50 that is tu
at fourth unit which is 15 minus tu at
third unit of consumption which is 45 so
mu at fourth unit of consumption is 5
which can be verified from the table so
this is how marginal utility and total
utility are related marginal utility can
also be found out by this formula that
is change in total utility divided by
change in quantity so again if I want to
calculate marginal utility at the fourth
unit of consumption for this I need to
know two things first the change in
total utility second the change in
quantity consumed now the change in
total utility
now the change in total utility here is
50 minus forty-five fifty minus forty
five which equals five and change in
quantity is 4 minus 3 that is 1 so 5 by
1 is 5 again we get the answer as 5 and
this 5 can again be verified from the
table so there are two formulas to
calculate marginal utility first is mu
at N equals 2
tu at n minus tu at n minus 1 again the
second formula is change in total
utility divided by change in quantity