Lesson: Consumption Choices

Total Utility and Diminishing Marginal Utility (continued)

Total Utility and Diminishing Marginal Utility (continued)

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  • Greatest utility describes how much someone is happy with what they purchased.
  • Each person's level of satisfaction is different. The level of satisfaction is called a util. Utils cannot be seen, measured, or compared between good or people.
  • Each person measures utils based on their preferences, experiences, and attitudes.
  • One person may find chocolate ice cream more satisfying than strawberry donuts. This person may rank chocolate ice cream with 10 utils and strawberry donuts with 5 utils.
  • If producers know that chocolate ice cream is more satisfying than strawberry donuts, they can determine which they make more of and how to price the two items.
  • Economists look at trends in buying and producing. These trends show patterns in utils.

José wishes to choose the combination that will provide him with the greatest utility, which is the term economists use to describe a person’s level of satisfaction or happiness with their choices. We begin with an assumption, which we will discuss in more detail later, that José can measure his own utility with something called utils. It is important to note that you cannot make comparisons between the utils of individuals. If one person gets 20 utils from a cup of coffee and another gets 10 utils, this does not mean than the first person gets more enjoyment from the coffee than the other or that they enjoy the coffee twice as much.  

The reason why is that utils are subjective to an individual. The way one person measures utils is not the same as the way someone else does. The table below shows how José’s utility relates to his T-shirt or movie consumption. The first column of the table shows the number of T-shirts consumed. The second column shows the total utility, or the total amount of satisfaction, that José receives from consuming that number of T-shirts.  


T-Shirts (Quantity) Total Utility Marginal Utility Movies (Quantity) Total Utility Marginal Utility
1 22 22 1 16 16
2 43 21 2 31 15
3 63 20 3 45 14
4 81 18 4 58 13
5 97 16 5 70 12
6 111 14 6 81 11
7 123 12 7 91 10
8 133 10 8 100 9


The most common pattern of total utility, in this example, is that consuming additional goods leads to greater total utility, but at a decreasing rate. The third column shows marginal utility, which is the additional utility provided by one additional unit of consumption. This equation for marginal utility is: