UTILITY

Utility
Capacity of a commodity to satisfy human wants is known as utility. 
Measurement of utility
(1) Cardinal measurement
(2) Ordinal measurement
(1) Cardinal measurement
Cardinal means serial wise. When utility is measured in terms of serial numbers like 1,2 and 3 is known as cardinal measurement of utility. 
(2) Ordinal measurement
Ordinal means order wise. When utility is measured in terms of orders like first, second and third is known as ordinal measurement of utility.
Total Utility (TU) 
Aggregate of utility received from each additional unit of commodity is known as Total Utility. 
Characteristics of Total Utility
(a) Initially TU increased. 
(b) At a certain point TU becomes maximum 
      or constant. 
(c) Finally TU decreases. 
Marginal Utility (MU) 
Utility from each additional unit of commodity is known as Marginal Utility. 

Characteristics of Marginal Utility
(a) Initially MU decreases. 
(b) At a certain point MU becomes zero. 
(c)  Finally MU becomes negative. 
Relationship between TU and MU
(a) Initially TU increases MU decreases. 
(b)  When TU is maximum MU becomes zero. 
(c)  Finally TU decreases MU becomes 
       negative. 
Law of Diminishing Marginal Utility
Law of diminishing marginal utility states that when any commodity is consumed utility from each additional unit of a commodity continuously decreases a time comes when utility becomes zero, if further more unit of commodity is consumed utility becomes negative. It is also known as Fundamental Law of Satisfaction or Fundamental Psychological Law. 
Assumptions of Law of Diminishing Marginal Utility
(1) Only standard units of the commodity are 
      consumed. Like, a cup of tea, not a spoon 
      of tea. 
(2) Consumption of the commodity is 
      continuous. Not that one unit of the 
      commodity is consumed now, and the 
      other tomorrow. 
Exception of this law
This law doesn't work in consumption of golgappa. In consumption of golguppa MU from 1unit to 2 unit increases, after it Mu decreases. 

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