Question

Fill in the blanks with appropriate alternatives given in the bracket:

1. _________________ refers to want satisfying power of a commodity. (Usefulness/ Utility/ Satisfaction/ Happieness)

2. Marginal utility diminishes, as consumption of commodity ________. (increases/ decreases/ remains constant/ become zero)

3. _________________ utility is the utility derived from the last unit of the commodity consumed. (Average/ Total/ Marginal/ Zero)

4. When MU is ______________ TU decreases. (positive/ negative/ zero/ high)

Answer 1

1) Utility refers to want satisfying power of a commodity.
Explanation:
Utility is the satisfaction that a consumer expects to derive from the consumption of a particular unit of a good. It is expressed in subjective terms as ‘utils’. For example, we can say that utility derived from one cold drink is 4 utils.

2) Marginal utility diminishes as consumption of commodity increases.
Explanation:
When a consumer consumes more and more units of a commodity, the marginal utility derived from the consumption of each additional unit of the commodity tends to fall. Further, the utility may become zero and even negative. This is known as the Law of Diminishing Utility.



3) Marginal utility is the utility derived from the last unit of the commodity consumed.
Explanation:
Marginal utility is the addition to the total utility, due to the consumption of an additional unit of a commodity. In other words, it is the utility derived from the last unit of the commodity consumed. Algebraically,
MU_n = TU_n – TU_{n –1}

4) When MU is negative, TU decreases.
Explanation:
Total Utility (TU) depends upon the Marginal Utility (MU). Marginal utility depicts the addition to total utility when an additional unit of the commodity is consumed. A negative marginal utlity suggests that additional to total utility is negative. Thus, total utility is falling.