ELEMENTARY TREATMENT OF THE UTILITY THEORY
CONTENT
- The Concept of Utility Theory
- Meaning of Utility
- Total Utility
- Average Utility
- Marginal Utility
- Law of Diminishing Marginal Utility
- Utility Maximization and Derivation of Demand Curve
- Derivation of Demand Curve from the Utility Theory
The Concept of Utility Theory
Utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative.
Meaning of Utility
Utility is the amount of satisfaction that a consumer derives from the consumption of goods and services at a particular time.
Since we have assumed that utility can be measured, we should be able to determine such facts: what is the Total Utility a consumer derives from the consumption of a commodity; or what are the marginal utilities derived from consuming several units of a commodity? As we said earlier, this is premised on the assumption that consumption can be measured. Let’s examine these in detail
Total Utility
This is the total amount of satisfaction a consumer derives from the consumption of several quantities of a commodity.
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