The concepts of total utility and the marginal utility are the basic concepts used in the cardinal measurement of utility.
According to Prof. Meir, "Total utility is the amount of satisfaction derived from one unit of that commodity".
According to Prof. Boulding, "Marginal utility of any quantity of commodity is the increase in the total utility, which results from a unit increase in consumption".
Prof. Bilas points out that, "Marginal utility is defined as the change in the total utility resulting from one unit change in the consumption of the good in question per unit of time".
In other words, total utility is the total satisfaction derived from the consumption of all the quantities of the commodity in possession or purchased. Marginal utility is the utility or satisfaction derived in consuming the last unit of that commodity.
Suppose a consumer, purchases a packet of biscuits, total utility is the satisfaction derived from the consumption of all the biscuits in the packet. In other words, total utility means total satisfaction experience regarding all the units of consumption at a particular point of time, apparently total utility tends to be more with the largest stock and less with the smallest stock. In mathematical terms total utility is a direct function of the number of units of a commodity in consideration. To put it symbolically:
Total utility of x is the increasing function of its quantity. Where TU is the total utility of the commodity, (Qx), ∆ (delta) refers to a small change.
This functional relationship of total utility to quantity of a commodity may be illustrated by constructing a utility schedule.
In this schedule, we have assumed a cardinal measurement of utility in terms of so many units expressed in numbers, it can be seen that the consumer in the illustration consumes 5 units of commodity ’x’ he derives 82 units of total satisfaction. Total utility thus, measures the strength of the consumers demand for the entire stock of the given commodity.
Marginal utility on the other hand refers to successful increment in the total utility made by taking separately each unit of the commodity in a successive manner as an addition to its total stock. Thus, utility of the first unit is measured as the marginal utility at the beginning. Then the utility of the 2nd unit x is measured as the marginal utility of the 2 units on the given stock similarly, the utility derived from the 3rd unit would be marginal utility of the stock 3 units.
Thus marginal utility may be measured as a difference between the utility of the total units of the stock of consumption of a given commodity minus that of consuming one unit less in the stock.
The computation of marginal utility has been illustrated in the following table:
It’s easy to see that the marginal utility determines the rate of increase in the total utility with the increase in the units of a commodity. In short marginal utility refers to the utility of marginal unit of consumption. It changes according to the changes in the stock of things. It is the last unit in the sequence of consumption.
In expounding the marginal utility analysis of the consumers demand behaviour, Prof Alfred Marshall has propounded 2 fundamental laws.
- The law of diminishing marginal utility
- The law of equi-marginal utility.
Notes provided by Prof. Sujatha Devi B (St. Philomina's College)
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