Utility
Definition of Utility :An economic term
referring to the total satisfaction received
from consuming a good or service
It measures the happiness or satisfaction
gained consuming commodities (goods
and services).
4-8.Marginal utility: The theory of
marginal utility was independently
developed around 1870 by William
Stanley Jevons in England, Carl Menger
in Austria and Leon Walras in
Switzerland.
4-8.1. Definition of marginal utility:
Amount of benefit derived from
consuming one additional unit of a
product or service.
4-8.2. Total utility & marginal utility
table:
Qx
1
2
3
4
5
TUx
10
18
24
28
30
MUx
10
8
6
4
2
6
30
0
4-8.3. Total utility & marginal utility
curve:
TU
30
28
24
18
10
MU
10
8
6
4
2
0
4-8.4. How can we get marginal utility?
TU
MU= Q
Example:
From the table below find the marginal utility?
Q
1
2
4
6
7
8
Solution
TU
30
40
58
70
76
76
MU
Questions:
1. Draw the curve of Price effects?
2. Draw the curve of Income effects?
3. Give a definition of Utility?
4. Draw the Total utility & marginal utility
curve?
5. From the table below find the marginal
utility?
Q
1
2
4
6
7
8
TU
100
90
86
70
55
25
MU
6. Translate the following paragraph:Elasticity
Ahmed who has super market ask his
colleague Mustafa who is studying
economics about the relationship
between the demand of hair spray and
its price, because he note that a slight
change in price of hair spray leaded to a
sharp change in the quantity demanded
of it.
Mustafa claim that relation to elasticity,
which means good or service is
considered to be highly elastic if a slight
change in price leads to a sharp change
in the quantity demanded or supplied.
Usually these kinds of products are
readily available in the market and a
person may not necessarily need them in
his or her daily life.