Diagramatically explain the relation between TU and MU.
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Relationship between TU and MU:
- 1. TU increases with an increase in consumption of a commodity as long as MU is positive. In this phase, TU increases but a diminishing rate as MU from each successive unit tends to diminish.
- 2. When TU reaches its maximum, MU becomes zero. TU stops rising at this stage. This point is known as a point of satiety.
- 3. When consumption is increased beyond the point of satiety, TU starts falling as MU becomes negative.
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