written by Daurie Augostine

-- written by Daurie Augostine



Saturday, February 6, 2010

Consumer Demand Theory --- TU & MU

TU = Total Utility
MU = Marginal Utility

Suppose the following numbers represent how much happiness or TU (stated by how much money you are willing to trade) you derive from increasing quantities of Vitamin Water (consumed at one time):

Vitamin Water
Q = 1, 2, 3, 4
TU = $2.00, 3.50, 4.50, 4.50

Find MU.

Answer: MU = $2.00, 1.50, 1.00, 0.00