Marginal utility represents the changes in total utility and hence any change in marginal utility will also represent the rate of change in total utility. The relationship between TU and MU can be explained with the help of following schedule.
Amount consumed | 1 | 2 | 3 | 4 | 5 | 6 |
Marginal Utility | 10 | 8 | 6 | 3 | 0 | - 2 |
Total Utility | 10 | 18 | 24 | 27 | 27 | 25 |
From the given table it can be concluded :-
(1) When MU decreases but remains positive, the TU also increases but at a diminishing rate. In the given schedule MU decreases from 1st unit till 5th unit and hence TU increases at a diminishing rate.
(2) At 5th unit of consumption, MU becomes zero due to which TU becomes maximum and constant.
(3) At 6 units of consumption, MU becomes negative and TU starts diminishing.
