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Thursday, April 9, 2015

Utility analysis

Want satisfying power of a commodity is called  Utility.

When you consume some thing it means you are getting some utility out of it.
To make understanding of the concept' utility is assumed to be measured in terms of numbers.The units of utility is taken as utils. Utility can be measured cardinally.
So if somebody says to you that he has got 80 utils of satisfaction after watching a movie you should understand that he is not joking.

Total Utility is the total psychological satisfaction a consumer obtains after consuming a particular amount of a good.

Marginal utility is net addition to total utility by consuming one more unit of the good.or Utility derived from the consumption of successive units.

Units Total utility Marginal utility
1 ----------- 50 ---------------- 50
2 ----------- 96 ---------------- 46


or
Units Total utility Marginal utility
5 ------------- 120 ----------------- -
6 ------------- 145 ----------------- 25