Introduction to Differences Between Total Utility and Marginal Utility
Total Utility and Marginal Utility are the terms that we are all familiar with from the subject of Economics. Both the terms are extremely important, not only for the students to learn, but also to know about the usefulness of a commodity. While this might come off as a completely new set of terms for some people, these are, however, one that many are well acquainted with.
It is a very important part of understanding the two, that the students not only know their definition but also what difference between marginal utility and total utility.
Difference between Total Utility and Marginal Utility
Similarity Between Total Utility and Marginal Utility
One similarity between Total Utility and Marginal Utility is the fact that these are both useful to economists. These essentially help them in understanding the consumer behavior pertaining to a single commodity - good or service. This is a way to identify whether or not there needs to be a change or advancement to the commodity they are offering.
More About the Topic
Utility, in general, means the usefulness of a good or service. In the Economics context, utility is more precisely defined as the satisfaction – actual or expected – that a consumer derives from using or purchasing a commodity.
In recent practice, utility is represented primarily in numerical value. In the 1300s and 1400s, Spanish economists considered only the qualitative usefulness of commodities, which would allow them to determine the prices for various goods and services. This concept went through multiple phases of change, from the ordinal model to the cardinal model.
These economic theories concerning utility combined with the assumption that every rational consumer would strive to maximize his/her utility from a particular product, thus, form the basis for determining demand and consequently their price.
There are three ways utility is expressed in Economics – total utility, average utility, and marginal utility. The difference between total utility and marginal utility alongside their corresponding relationship are crucial topics in senior secondary Economics and require an in-depth understanding of their intricacies.
Therefore, prior to beginning with distinctions between these two ideas of utility, it is quintessential to learn about those individually.
What is Total Utility?
Total utility (TU) is the whole amount of fulfillment that a consumer derives from the consumption or purchase of multiple units of a particular commodity, within his/her fixed income level and budget.
A total utility example would be, one unit of a chocolate bar provides you with a utility of 10 utils; on the 2ndunit you receive 8 utils worth of satisfaction; the 3rd unit provides a utility of 5 utils. Therefore, the TU you derived from the consumption of three chocolate bars is 23 utils (10 + 8 + 5).
Utils is the standard unit for measuring utility. It is a relative unit as utility derived from the consumption of a particular product will differ from one individual to another. For this purpose, economists suggest the usage of monetary denominations in lieu of utilization for more effective quantification.
What is Marginal Utility?
Marginal utility definition Economics would be the change in total utility due to the consumption of one additional unit of a commodity. In other words, it is the utility one derives from the consumption of an individual unit rather than in whole.
Hence, if considering the above example, the 10 utils from the first chocolate bar, 8 utils from the second bar, and 5 utils from the third bar can be represented as the marginal utility of that chocolate bar.
Derivation of MU is crucial to economic practice since it lends an idea about a product’s demand for an individual consumer.
A marginal utility example would help in understanding the above statement more clearly. Upon consumption of one unit of product X, you derive 20 utils of satisfaction. On to the next unit, you derive 15 utils of utility. It goes on till the 6th unit when additional utility derived from the consumption of one extra unit has come down to zero, i.e. MU = 0. A rational consumer would stop his/her consumption at this point since he/she is not deriving any extra satisfaction.
Therefore, the demand for product X for you would be 6 units. This phenomenon of gradual declination in MU is known as the law of diminishing marginal utility.
According to this law of marginal utility, the first unit would provide the highest level of utility and then as consumption increases, marginal utility declines.
The primary differences between TU and MU are discussed in the table below.
What is the Relationship Between Total Utility and Marginal utility?
The relationship between TU and MU can be properly understood through the table beneath. Here, we are assuming that the consumer is rational and expects utility from the consumption of coffee. Each unit is a cup of coffee.
We can see that both TU and MU began from the same point. However, as consumption increased, total utility continued increasing, whereas, the marginal utility kept declining in line.
On the 7th unit, when total utility is at its peak (95 utils), the marginal utility was zero, therefore, implying that any additional cup of coffee from that point would result in negative MU or dissatisfaction. A rational consumer would stop his/her consumption at the 7th unit.
Thus, from the above discussion, we can encapsulate the relationship between TU and MU as noted below –
Marginal utility falls when total utility rises
MU = 0 when total utility is maximum
From a consumer’s perspective, the marginal utility can be aligned with the cost of consuming a commodity. For instance, if the marginal utility cost of a commodity is Rs.20 and MU derived from it is more than 20 utils (assuming Re.1 = 1 utils), then such individuals will continue his/their consumption until the marginal utility of that commodity equals its price. It is also known as the consumer’s equilibrium.
While this is one topic from Economics, multiple such topics require a thorough understanding, since memorizing this subject does not cut it if you want to ace your exams. For that purpose, you can refer to Vedantu’s study materials and online live classes.
FAQs on Total vs. Marginal Utility: Key Differences
1. What is the key difference between Total Utility (TU) and Marginal Utility (MU) in Economics?
The key difference lies in what they measure. Total Utility (TU) refers to the total satisfaction a consumer gets from consuming all units of a particular good or service. In contrast, Marginal Utility (MU) is the additional satisfaction gained from consuming one more unit of that same good or service. Essentially, TU is the sum of all marginal utilities, while MU is the change in total utility from one unit to the next.
2. What is the Law of Diminishing Marginal Utility and why is it a fundamental concept?
The Law of Diminishing Marginal Utility states that as a consumer consumes more and more units of a specific commodity, the extra satisfaction (marginal utility) derived from each successive unit goes on declining. This concept is fundamental because it explains consumer behaviour, forms the basis for the law of demand, and helps understand why a consumer stops consuming a product after a certain point—when the marginal utility equals the price or becomes zero.
3. How are Total Utility and Marginal Utility calculated? Please provide an example.
Total Utility is the sum of marginal utilities (TU = ΣMU). Marginal Utility is the change in total utility divided by the change in quantity (MU = ΔTU / ΔQ). For example, if eating one chocolate bar gives 10 utils of satisfaction (TU=10, MU=10), and a second one gives an additional 8 utils, the new TU is 18 (10+8), while the MU of the second bar is 8.
4. How do the curves for Total Utility (TU) and Marginal Utility (MU) relate to each other graphically?
The relationship between the TU and MU curves is distinct and predictable, typically shown in three stages:
- Initially, as long as MU is positive and decreasing, the TU curve increases, but at a diminishing rate.
- When the TU curve reaches its maximum point, the MU curve intersects the x-axis, meaning MU is zero. This is known as the point of satiety.
- When the TU curve starts to decline, the MU curve becomes negative, indicating dissatisfaction or disutility from additional consumption.
5. Can Marginal Utility be negative? If so, what does this imply about Total Utility?
Yes, Marginal Utility can be negative. This occurs when the consumption of an additional unit of a commodity leads to dissatisfaction, reducing overall satisfaction. For example, eating a sixth slice of pizza when you are already full might make you feel sick. When Marginal Utility becomes negative, it signifies that Total Utility has started to decrease from its maximum point. A rational consumer would have stopped consumption before this point.
6. What is the relationship between Marginal Utility and the concept of consumer's equilibrium?
The concept of Marginal Utility is central to determining a consumer's equilibrium, which is a state of maximum satisfaction. According to the utility analysis for the 2025-26 CBSE syllabus, a consumer achieves equilibrium when the marginal utility of a commodity, measured in terms of money, is equal to its price. The condition is expressed as MUx = Px (where MUx is the marginal utility of good X and Px is its price). This ensures the consumer gets satisfaction equal to the price they pay for each unit.
7. Why is it incorrect to say that Total Utility is more important than Marginal Utility for business decisions?
This is a common misconception. While Total Utility gives a sense of overall market size, it is Marginal Utility that is often more critical for business decisions like pricing and production. Marginal Utility directly influences a consumer's decision to buy one more item. Businesses use this to understand price elasticity and set prices. For instance, a low marginal utility suggests consumers are less likely to buy more unless the price drops, guiding strategies for discounts and sales.
