This document discusses concepts related to consumer utility and consumer equilibrium. It defines total utility as the satisfaction derived from consuming a commodity and marginal utility as the additional satisfaction from consuming one more unit. Consumer equilibrium exists when marginal utility per rupee equals price, meaning the consumer derives the most satisfaction for their money spent. The law of diminishing marginal utility and conditions for consumer equilibrium in a single commodity are explained. Graphs and a utility schedule are provided to illustrate these concepts.

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KVS, Delhi Region

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KVS, Delhi Region

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Sum total of satisfaction
that the consumer derives
when a certain number of
units of particular
commodity are consumed
TU=F(Qx) or TU=∑MU
TOTAL UTILITY
MARGINAL
UTILITY
It means addition to the total
utility from the consumption of
an one more unit of a good.
Mun = TUn-TUn-1
or, Mux = ∆Tux ∕ ∆Qx

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Assumptions of the
Utility Approach
• Utility can be cardinally
measurable, i.e. can be expressed
in exact units;
• Utility is measurable in monetary
terms;
• Consumer’s income is given;
• Prices of commodities are given &
constant;
• Constant Marginal Utility of Money

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As a consumer goes on coming more and more units
of a commodity the additional benefit that he derives
from the additional unit of a commodity goes on
falling
MUx
Marginal
utility ( in
Rs.)
Quantity

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Consumer Equilibrium
It refers to a situation under which a
consumer spends his entire income on
purchase of a good in such a manner that
gives him maximum satisfaction and he has
no tendency to change it.

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Condition of Consumer Equilibrium
MUx Px =MUm
where,MUx = Marginal Utility of Product ‘x’
Px = Price of ‘x’
MUm = Marginal Utility of money
• MUx = MUm * Px ty of Money
Marginal Utility of the good = Utility of Price paid

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UTILITY SCHEDULE
OF A CONSUMER

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Graphical Presentation
Consumer’s Equilibrium –
One Commodity
Price,
Utility
Quantity

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CASE OF A
SINGLE COMMODITY
For the consumer
Utility obtained−Benefit.
Price Payable−Cost.
A consumer will continue to consume additional
units of a commodity till the point where his
marginal utility (in terms of money ) is greater
than or equal to the price of the commodity.
Being a rational consumer he wouldn’t pay more
price for a product that gives him lesser sati

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LOCATING CONSUMER EQUILIBRIUM

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Questions for self-Evaluation
• Define utility.
• What is marginal utility ?
• Explain the law of marginal utility
with the help of example.
• What does consumer equilibrium
mean?
• State the condition of consumer’s
equilibrium in the case of single
commodity.

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KVS, Delhi Region
Mrs. Anita Bhardwaj KV,
Vigyan Vihar
Mrs .Monika Bajaj KV, Tagore
Garden
Mrs. Leena Singh KV, AGCR
Mr. Sri Keshav KV, no.2 Delhi
Cantt
Mrs .Ritu Tanwar KV, AFS
Rajokri
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