MATHEMATICAL APPROACH TO CONSUMER THEORY

            MATHEMATICAL APPROACH TO CONSUMER THEORY. Most mathematical questions that may come from the consumer’s theory require a proper understanding of total utility (TU), marginal utility (MU) and average utility (AU), including their formulae as discussed in this post.. concept of utility

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An incomplete schedule is usually presented and students are required to fill the blank spaces. It is expected that you use the correct formulae in solving the problems to enable you to arrive at correct solutions.

gmaximum utility

Example 1

Utility Schedule

Quantity of good consumedTotal utilityMarginal utility
0 1 2 3 4 5 60 10 16 ? ? 23 230 10 ? 4 ? 1 ?
  • Complete the above utility schedule
  • Draw the marginal utility curve
  • (i) At what quantity does TU equal MU?
  •  What is the value of MU when TU

reaches the maximum?

  • What happens to the values of TU as the quantity consumed increases?
  •  What happens to the values of MU as the quantity consumed increases?

The table above shows Mr Y’s schedule of utility for oranges and mangoes. The prices of oranges and mangoes are at $ 1.00 each, Mr. Y  has $10.00 to spend on the goods. Use information contained in the table to answer the questions that follow.

consumer theory

(ii)           State the marginal condition for the utility maximization

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