Consumer Equilibrium Utility Analysis Class 11 | Chapter 3 | Economics | AHSEC - Nemazedu

                Consumer's Equilibrium 

Q1. Define Utility.

Ans:- The word utility denotes the want satisfying power of a commodity or service. All goods and services possess certain power to satisfy our wants. This power to satisfy the wants of the people directly or indirectly is called utility.

Q2. Define Marginal Utility.

Ans:- Marginal Utility is the addition made to total utility by having an additional unit of the commodity. Algebraically, the marginal utility(MU) of n units of a commodity is the total utility(TU) of n units minus the total utility of n-1. This, MU of nth unit = TU of n units - TU of (n - 1).

Q3. Define Total Utility.

Ans:- Total utility connotes the sum total of utilities obtained by the consumer from different units of a commodity. In other words, total utility is the sum total of utilities derived from all the units consumed. Thus, 

Total Utility = MU of 1st unit + MU of 2nd unit + . .  . . . . . . .+ MU of nth unit.

Q4. State the concept of utility function.

Ans:- The utility function expresses utility as a function of consumption of real goods. In other words, the utility function defines the level of utility or satisfaction as a function of commodities consumed. Thus,

U = f ( N ) 

Where, 

U = utility 

N = number of unit of goods consumed

Q. State the law of diminishing marginal utility.

Ans:- The law of diminishing marginal utility state that marginal utility from consuming each additional unit of a commodity declines as its consumption increases, while keeping consumption of other commodities constant.

Q. State the assumptions of the law of diminishing marginal utility.

Ans:- The main assumptions of the law of diminishing marginal utility are:-

a. Tastes, preferences and habits of the consumer remain constant.

b. Consumer is rational.

c. Various units of the goods are homogenous.

d. There is no time gap between the consumption of the different units.

e. Consumer's income remain constant.

f. There is perfect knowledge of the market.

Q. Write the assumptions of utility analysis.

Ans:- Following are the main assumptions of utility analysis:-

a. It assumes that the consumer is a rational being who calculates and measures, chooses and compares utility of different units of the various commodities and thus maximizes utility.

b. The consumer possesses a perfect knowledge of the choices open to him and that the choices are certain.

c. The prices of the various commodities are not influenced by variation in their prices.

d. It is further assumed that there are no substitutes and that the utilities are measurable in terms of money.

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