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
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.
|Quantity of good consumed||Total utility||Marginal utility|
|0 1 2 3 4 5 6||0 10 16 ? ? 23 23||0 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.
- Calculate the marginal utility for all levels of consumption for the goods.
- At equilibrium, how many,
- Mangoes will the consumer buy?
- (i) State the law of diminishing marginal utility
(ii) State the marginal condition for the utility maximizationRelated Posts