Question

Study the schedule given below and answer the questions that follow.

Number of Strawberry Ice creams	1	2	3	4	5	6	7
Total Utility (Units)	55	100	140	170	185	185	170

1. Which law is evident in the above schedule? What does the law state? [2]
2. How many units of ice cream will be consumed when the price of an ice cream is ₹ 40? Substantiate your answer with a reason. [2]
3. How is marginal utility related to total utility till the point of satiety? [2]

Answer 1

1. The schedule illustrates the Law of Diminishing Marginal Utility (DMU). This law states that as a consumer consumes more units of a specific commodity, the additional satisfaction (marginal utility) derived from each successive unit decreases, assuming the consumption of other goods remains constant 1.
2. Calculate the Marginal Utility (MU):
   • Units 1 to 4: MU is 55, 45, 40, and 30 respectively.
   • The consumer will consume 3 units of ice cream.
   • Reason: According to the single commodity equilibrium condition, a consumer buys until marginal utility (MU) equals price (P). At the 3^rd unit, the MU is 40 units (140 – 100), which matches the price of ₹ 40. Beyond this, the MU (30) falls below the price, leading to a loss in net utility.
3. Until the point of satiety (the 6^th unit), the relationship is as follows:
   • As long as marginal utility is positive and decreasing, total utility increases at a diminishing rate.
   • When marginal utility reaches zero (at the 6^th unit), total utility is at its maximum (185 units). This specific point is known as the point of satiety.