Concept of Utility: TU & MU
Class 11 Micro Economics — Understanding utility, total utility, marginal utility, and the relationship between them
Meaning of Utility
Definition
Utility refers to the want-satisfying power of a commodity. It is the satisfaction, actual or expected, derived from the consumption of a commodity.
Utility differs from person to person, place to place, and time to time. In the words of Prof. Hobson, “Utility is the ability of a good to satisfy a want.” When a commodity is capable of satisfying human wants, it has utility.
The dictionary meaning of utility is “usefulness”. However, to an economist, higher utility does NOT mean greater usefulness.
Key Insight
A commodity may not be useful, yet it may have utility for a particular person.
Example
A mobile game like PUBG or Free Fire might seem “useless” to a parent, but it gives very high utility to a student who enjoys playing with friends. The game itself hasn’t changed — only the person experiencing it.
Measuring Utility
How do you quantify how much you like something? Economists developed two ways to measure satisfaction: an imaginary unit called “utils” and a practical measure using money.
Step 1: The Problem
You order a slice of pizza from Domino's and a burger from McDonald's. Can you tell “how much” you liked one over the other? You need a quantitative measure.
The Pizza Story — Understanding TU & MU
Let's follow Rahul at his birthday party. A large pizza arrives. Watch what happens to his satisfaction as he keeps eating slice after slice. This is the most intuitive way to understand Total Utility and Marginal Utility.
Rahul's Birthday Pizza
Slice #1
Loved it!
20 MU
Marginal Utility
Marginal Utility Formula
TU = Sum of all MU
Key Takeaway from the Story
Rahul's first slice gave 20 utils of MU. The second gave 16. The fifth gave 0 — that's the point of satiety where TU peaks at 50. The sixth slice actually reducedhis total satisfaction — that's disutility. This relationship between TU and MU is the foundation of consumer behavior.
Key Takeaways
- The utility derived from the first unit of a commodity is known as initial utility.
- Total utility is zero at zero level of consumption.
- MU = TUₙ − TUₙ₋₁ — the additional satisfaction from one more unit.
- TU = Σ MU — total utility is the sum of all marginal utilities.
Relationship Between TU and MU
The pizza story showed us the pattern. Let's now formalize it — here's the complete data table and interactive graph showing exactly how TU and MU relate.
| Pizza Slices | Marginal Utility (MU) | Total Utility (TU) |
|---|---|---|
| 1st slice | 20 | 20 |
| 2nd slice | 16 | 36 |
| 3rd slice | 10 | 46 |
| 4th slice | 4 | 50 |
| 5th slice | 0 | 50 |
| 6th slice | -6 | 44 |
Interactive TU-MU Dual Graph
Tap or hover points on either graph to explore
Three Key Relationships
TU increases as long as MU is positive
TU increases with increase in consumption as long as MU is positive (till the 4th slice). TU increases but at a diminishing rate because MU from each successive slice diminishes.
When TU reaches maximum, MU becomes zero
At the 5th slice, TU is at its maximum (50 utils) and MU = 0. Point of satiety — the consumer is fully satisfied.
TU falls when MU becomes negative
Beyond satiety, TU starts falling as MU becomes negative. Negative MU = disutility — eating one more slice makes you feel worse.
Three States of Marginal Utility
- Positive MU: If TU increases from consumption of additional units, MU is positive.
- =Zero MU: If consumption of an additional unit causes no change in TU, MU = 0. TU is at its maximum — the point of satiety.
- Negative MU: If consumption of an additional unit causes TU to fall, MU is negative (disutility).