Hi, I am a graduate in mathematics and this is my first attempt at learning economics. Can someone please explain the shapes of the marginal utility and total utility curve. Its on Module 4, pg 6 of CMP. I have attached it for reference. Kindly help.
Does it help if you think about in the following manner? Think what utility means I'd go back to its definition. Marginal Utility is the extra benefit (reward) you get say from putting in an extra unit of 'effort' (production). It could be the extra pleasure say of eating another chocolate from, or the extra knowledge you gain for every additional minute of study (all I'm getting at here is it isn't always financial, the concept transfers to many things). The first unit will give you the most 'reward'. Then you continue adding more and it gives you less and less addition reward til it approaches something quite small (it won't necessarily become zero; depends on the circumstance - in the eating chocolate example, if it makes you I'll, perhaps the marginal utility will be zero (or less!), but each bit of study (should) add knowledge hence has a positive impact). Total utility is then the sum of every marginal utility. In economics, it's usually looking at financial value I just thought giving human examples of how you personally feel utility/value may help.
Thank you very much Sir, I was able understand the concept well with your example. I have come up with my interpretation of the marginal and total utility curves as functions of income, it is as follows, kindly go through the same and do let me know the areas that need improvement. Marginal utility is the extra benefit (increase in purchasing capacity) derived when extra income is spent. The additional benefit gained from the additional pound that was spent will give the highest level of satisfaction. Any further spending will give less satisfaction as the individual will now have moved to the 'high income group' where the income elasticity for high-tech products does not increase as income increases (because they will probably have them anyway and will not buy any more if the income increases). Hence the marginal utility decreases with increase in income. Total utility is the sum of marginal utility. The curve is upward sloping as the marginal utility of income is positive and becomes concave as the marginal utility of income decreases with increase in income.
You've got the idea. the curve flattens out (becomes asymptotic . Marginal utility of income is never negative because if you don't spend you save the money. (in fact I was being light hearted with my chocolate scenario because you still enjoy putting the chocolate in your mouth whatever so there is instant positive benefit; regrets aren't a factor in utility!) I wouldn't bring elasticity into your definition. Remember in addition to words, you can also sketch the curve even if the question says define. Notice the difference too between sketch and draw. For draw you need some idea of scale.
