Simply put, they suggested that utility can be measured in terms of price or money a consumer is willing to pay. Total utility refers to the total satisfaction obtained from the consumption of all possible units of a commodity. It measures the total satisfaction obtained from the consumption of all the units of that good. MU is not uniformly applicable to all kinds of commodities or activities. For some, it is positive while for others, it is negative.

Market Demand:

We’ll explore key ideas such as utility, the concept of diminishing marginal utility, and the theory of demand. Understanding these concepts helps in analysing consumer choices and market demand. The total utility, TU increases with the increase in the consumption of a commodity as long as marginal utility MU is positive. In this phase, TU increases but at a diminishing rate because MU from each successive unit tends to diminish. When the consumption is increased beyond this point, the point of satiety, TU start falling and MU becomes negative. This relationship between TU and MU is depicted by the diagram given above.

FAQs on Theory of Consumer Behaviour Class 12 Notes: CBSE Microeconomics Chapter 2

Till 4 burgers, TU increases at a diminishing rate as MU from each successive burger diminishes. Marginal Utility is the utility obtained from the last unit of a product or service. It refers to the additional utility on account of the consumption of an additional unit of a commodity. As utils vary from individual to individual, it cannot be taken as a standard unit for measurement. Therefore, various economists suggested that utility should be measured in monetary terms.

Types of Utility

Changes in the quantity demanded are indicated by movement along the demand curve. According to the IC analysis, a buyer maximises his utility by selecting a package of two commodities that is also within his budget. This will be used to calculate a commodity's demand when mu is falling tu is curve.

To achieve the highest level of satisfaction, a consumer must follow certain rules or principles since resources are limited in nature in comparison to limitless demands. The two basic approaches for studying customer behaviour are the Cardinal Utility approach and Ordinal Utility Approach. Eventually, at the fifth sip, we can see that the MU becomes negative. This indicates that the person is deriving negative utility out of his consumption and that any additional sip may affect him adversely. The MU or satisfaction level goes on decreasing with each sip until the third sip of water. The total utility is increasing but at a diminishing rate.

1. Marketers must understand consumer purchasing behaviour for their products to succeed.
2. A consumer is someone who buys goods and services to fulfil demands.
3. The decisions made by private citizens, corporations, governments and nations are observed when allocating resources.
4. The change happens because of the change in the consumer's income and a change in the goods' prices.
5. It is the total utility derived from the consumption of all units of a commodity.

Chapter 8: Theory of Supply

The indifference curve will neither touch nor will they intersect each other. Two points of the indifference curve do not give the same satisfaction level. When the indifference curve is high it shows a high satisfaction level. The marginal rate of substitution is the slope of the indifference curve. It is because of the MRS diminishing, that the indifference curve is convex in nature. As with increase in quantity of one good, the consumer forgoes less and less of the ther good.

Where,MUx is the marginal utility of commodity x;ΔTUx is the change in total utility of commodity x;ΔQx is the change in the quantity of commodity x. Often referred to as consumer purchasing behaviour, consumer behaviour consists of all of the factors that influence a consumer's product search, selection, and purchase. We can also use the phrase to refer to the acquisition of services. Consumer behaviour’s post-purchase stage has also been included here.