Question

Using the indifference curve diagram you constructed in Problem F-4, add in Sue's budget constraint using the information in Problem F-5. Illustrate the utility-maximizing combination of bottled water and soft drinks.

Short answer

Total utility rises as consumption rises, while marginal utility falls as consumption rises.

Step-by-step solution

Introduction

Total utility is the sum of all utility received by a customer after all commodities have been consumed. The utility that a customer receives after consuming an additional commodity is known as marginal utility.

Explanation

As customers consume more products, their total utility rises while their marginal utility decreases. At this point, total utility reaches its greatest peak, and marginal utility becomes zero. After then, overall utility begins to decline, while marginal utility becomes negative.

Conclusion

The following table and figure can be used to describe it. The table depicts commodity consumption, total utility (TU), and marginal utility (MU) (MU).

The above table shows the total utility and marginal utility for the seven commodities. Total utility rises as consumption rises, while marginal utility falls as consumption rises.