In economics, "TU" stands for Total Utility, and "MU" stands for Marginal Utility. Total Utility refers to the total satisfaction or benefit a consumer derives from consuming a certain quantity of a good or service. Marginal Utility, on the other hand, represents the additional satisfaction or benefit gained from consuming one more unit of a good or service.
Let's create an example table to illustrate Total Utility (TU) and Marginal Utility (MU) using hypothetical values for the consumption of a good (let's say, pizzas):
Assume a person consumes pizzas and experiences the following levels of utility:
| (Units) | (TU) | (MU) |
|-------------------------|--------------------|-----------------------|
0 0 -
1 50 50
2 90 40
3 120 30
4 140 20
5 150 10
In this example:
- When the person consumes the first pizza, the Total Utility is 50, and the Marginal Utility is also 50. This means the person gains 50 units of satisfaction from consuming the first pizza, and the additional satisfaction gained from consuming the first pizza is also 50.
- As the person continues consuming more pizzas, the Total Utility increases, but the Marginal Utility decreases. This is a typical pattern due to the law of diminishing marginal utility. It states that as a person consumes more of a good, the additional satisfaction they derive from each additional unit consumed tends to decrease.
- When the person consumes the fifth pizza, the Total Utility has reached 150, and the Marginal Utility has fallen to 10. This implies that the person is still gaining satisfaction from consuming more pizzas, but the rate at which that satisfaction is increasing is diminishing.
Remember that these numbers are for illustrative purposes only, and real-world utility values can vary based on individual preferences and other factors. The example above demonstrates the concept of diminishing marginal utility, which is a fundamental idea in economics.
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