Livestock Economics, Marketing and Business Management

THEORY OF CONSUMER BEHAVIOUR

• Utility is a subjective term like pain or joy which can only be felt and which cannot be measured. Suppose a person starts eating egg one after another.
• The first egg gives him great pleasure. By the time he takes the second it gives him less satisfaction as the second egg is meeting with a less urgent want.
• The satisfaction of the third will be lesser than of second, that of the fourth is lesser than that of the third and so on.
• The additional or incremental satisfaction i.e. the marginal utility with every successive unit of egg will go on decreasing till it drops down to zero.
• If the consumer is forced to take more, the satisfaction becomes negative and the utility changes to dis-utility.
• Marginal utility (MU) is defined as the change in total utility (TU) resulting from unit change in consumption of commodity per unit time.

Units (eggs)	Total Utility (units of satisfaction)	Marginal Utility (units of satisfaction)
1	25	25
2	45	20
3	60	15
4	70	10
5	75	5
6	75	0
7	71	-4

• Total Utility curve increases at beginning and reaches maximum and decline eventually with increase in quantity of goods consumed.
• Marginal utility slopes downward from left to right.
• It reaches zero when total utility reaches maximum and becomes negative if more of goods consumed after that.
• It shows as the quantity of goods consumed increases marginal utility decreases.
• It is notable point that marginal utility is zero when total utility is maximum.