Economists using marginal utility theory assume that consume

Economists using marginal utility theory assume that consumers\' objectives are to maximize their total utility. maximize their marginal utility. maximize their income. none of the above

Solution

Solution:

The objective of UTILITY theory is to get Utility maximization i.e MAXIMIZES TOTAL UTILITY & DIMINISHES MARGINAL UTILITY

This theory upholds upto the consumer reaches his maximum satisfaction

UTILITY MAXIMIZATION:The consumer’s money income should be allocated so that the last dollar spent on each product yields the same amount of extra (marginal) utility.

EXPLANATION:

Lets a consumer consuming apples then he can consumes apples upto his hunger gone/satisfaction reaches maximum.

S.NO

QUANTITY OF APPLES

CONSUMED (C )

TOTAL UTILITY

(T.U)

MARGINALUTILITY

(M.U)

1

0

5

NA

2

1

9

5

3

2

12

4

4

3

13

3

5

4

13

1

6

5

12

0

7

6

10

-1

8

7

9

-2

9

8

7

-3

MARGINAL UTILITY=Change in total utility / Change in number of units consumed=T.U2 –T.U1/C2-C1

By using above data we can plot TOTAL UTILITY vs Quantity of apples consumed results

Total utility increases at decreasing rate while Marginal Utility decreases

S.NO	QUANTITY OF APPLES CONSUMED (C )	TOTAL UTILITY (T.U)	MARGINALUTILITY (M.U)
1	0	5	NA
2	1	9	5
3	2	12	4
4	3	13	3
5	4	13	1
6	5	12	0
7	6	10	-1
8	7	9	-2
9	8	7	-3