What will be the value of Marginal utility of the 4th unit.
|
Units consumed |
Total Utility derived (utils) |
|
1 |
10 |
|
2 |
8 |
|
3 |
5 |
|
4 |
2 |
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → -3 utils
Marginal Utility (MU) is the change in total utility when one more unit is consumed. It is calculated as:
Marginal Utility (MU) = Total Utility of n units - Total Utility of (n-1) units
For the 4th unit:
-
TU at 4 units = 2 utils
-
TU at 3 units = 5 utils
MU of 4th unit = (Total Utility of 4th unit) - (Total Utility of 3rd unit)
= 2−5
=−3 utils