Revision: Utility Analysis Eco HSC Commerce (English Medium) 12th Standard Board Exam Maharashtra State Board

1. “Utility is the ability of a good to satisfy a want.” (Prof. Hibdon)
2. “Utility may be the quality which makes a thing desirable.” (J.S. Nicholson)

Total utility refers to the total satisfaction derived by the consumer from the consumption of a specific quantity of a commodity.

Marginal utility refers to the additional utility derived from the consumption of an additional unit of a commodity.

• "The marginal utility which results from a unit increase in consumption." -Prof. Boulding
• "Marginal utility is an addition made to total utility by consuming one more unit of a commodity." -Prof. Chapman

According to Prof. Leftwitch, "Total utility refers to the entire amount of satisfaction obtained from consuming various quantities of a commodity."

1. According to Chapman: "The more we have of a thing, the less we want additional increments of it or the more we want not to have additional increments of it."
2. According to Anatol Murad, "The law states that other things being equal, the marginal utility of a stock decreases as the quantity of the stock increases."
3. According to Samuelson, "As the amount consumed of a good increases, the marginal utility of the good leads to a decrease."

Total Utility:
\[TU_n=MU_1+MU_2+...+MU_n\]

When more than one unit is added:
\[MU=\frac{\Delta TU}{\Delta Q}\]

Marginal Utility:
\[MU_n=TU_n-TU_{n-1}\]

• Utility means want-satisfying power.
• It is subjective, varies with time/place, and forms the base of demand.
• Utility differs from usefulness, pleasure, and satisfaction—each has a unique meaning in economics.
• Common types include form, place, time, service, knowledge, and possession utility. 

• Total utility = total happiness from all units.
• Marginal utility = extra happiness from one more unit.
• Marginal utility usually decreases as we consume more.
• When marginal utility becomes zero, total utility is at its maximum.
• If you keep consuming, marginal utility can turn negative (“too much of a good thing!”).

• Given by French engineer Gossen
• Also called Gossen’s First Law
• First given by H.H. Gossen, systematically explained by Alfred Marshall
• As consumption increases, marginal utility decreases
• Other things remaining constant
• Each extra unit gives less satisfaction.
• Utility may become zero or even negative if overconsumed.
• Law helps explain real consumer and economic behaviour.

• Marginal utility (MU) falls as consumption increases (Law of DMU).
• Consumer buys units as long as MU (in money terms) > Price.
• Consumer’s equilibrium is reached when MU = Price.
• Units with MU > Price are intra-marginal; MU < Price are extra-marginal.
• This relationship forms the basis of the Law of Demand.