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Key points on Marginal Utility - Theory of Consumer Behaviour, CBSE Class 12 Economics Video Lecture

FAQs on Key points on Marginal Utility - Theory of Consumer Behaviour, CBSE Class 12 Economics Video Lecture

1. What is the concept of marginal utility in the theory of consumer behavior?

Ans. Marginal utility is a concept in the theory of consumer behavior that measures the additional satisfaction or usefulness a consumer derives from consuming one additional unit of a good or service. It explains how consumers make decisions about what to consume and how much to consume. According to the theory, as a consumer consumes more units of a good or service, the marginal utility derived from each additional unit decreases.

2. How is marginal utility calculated?

Ans. Marginal utility can be calculated by dividing the change in total utility by the change in the quantity consumed. The formula for calculating marginal utility is: Marginal Utility = (Change in Total Utility) / (Change in Quantity Consumed) For example, if consuming an additional unit of a good increases total utility from 100 to 120, and the quantity consumed increases from 4 to 5, then the marginal utility of the fifth unit would be (120-100) / (5-4) = 20.

3. What is the law of diminishing marginal utility?

Ans. The law of diminishing marginal utility states that as a consumer consumes more units of a good or service, the marginal utility derived from each additional unit decreases. This means that the consumer's level of satisfaction or usefulness decreases as they consume more of a good. For example, the first slice of pizza may provide a high level of satisfaction, but as the consumer eats more slices, the marginal utility of each additional slice decreases.

4. How does the concept of marginal utility influence consumer behavior?

Ans. The concept of marginal utility plays a crucial role in influencing consumer behavior. It helps explain why consumers make choices about what to consume and how much to consume. Consumers tend to allocate their limited resources (such as income) towards goods and services that provide the highest marginal utility per unit of cost. They aim to maximize their overall satisfaction by considering the marginal utility they derive from each additional unit of a good or service.

5. Can marginal utility ever be negative?

Ans. No, marginal utility cannot be negative. Marginal utility represents the additional satisfaction or usefulness derived from consuming one additional unit of a good or service. Negative marginal utility would imply that consuming an additional unit decreases the overall satisfaction or usefulness, which contradicts the concept. However, the marginal utility can decrease and approach zero as the consumer consumes more units, following the law of diminishing marginal utility.

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