Question

Complete each of the following sentences:

A. Your tastes determine the _____________ you derive from consuming a particular good.

2. ___________________________ is the change in total utility resulting from a one-unit increase in the consumption of a good.

3. If marginal utility is negative, total utility must be ______________.

Answer 1

A. Your tastes determine the utility you derive from consuming a particular good.

Man derives satisfaction (utility) from consumption of goods. He will consume goods according to his taste and preferences.

B. Marginal utility is the change in total utility resulting from a one-unit increase in the consumption of a good.

Marginal utility is the addition made to the total utility by consuming one more unit of a good.

MU_n=TU_n - TU_n-1

C. If marginal utility is negative, total utility must be decreasing.

When total utility increases, marginal utility falls

When total utility is maximum and constant, marginal utility is zero

When total utility starts falling, marginal utility becomes negative.