Let Px = $10 per unit, Py = $25 per unit and B = $200. Draw...

Let P_x = $10 per unit, P_y = $25 per unit and B = $200. Draw the budget line using these data. Explain the concepts of total utility, marginal utility and the Law of Diminishing Marginal Utility.

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Expert Solution

The term utility simply means the satisfaction that is derived by the person by consuming any good or service
so the total utility is the sum of all the utility or the given satisfaction that is received by any consumer by consuming the good or the service
In simple words marginal utility is the additional utility that is derived by consuming 1 extra good or service
utility is generally measured in utils and it differs from person to person
Accurately it cannot be measured
marginal utility always declines for each successive quantity of consumption for example- any person like any good then then first consumption will give the maximum utility and as the consumption rises the marginal utility decreases and it even becomes zero then negative
It is also called law of diminishing marginal utility

Rahul Sunny answered 3 months ago

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