[Music] in our economics class today we shall be looking at theory of consumer behavior and under this Theory we have divided into two we are looking at the first part today we will be looking at De of utility follow by the concept of utility we shall also examine law of diminishing marginal utility utility this is the satisfaction that a consumer derived from consuming a commodity at a particular time is when we are talking about utility every commodity has something to hover a consumer so whatever consumer deriv from consuming the commodity is what we mean by utility so every commodity is available in order to satisfy consumer want and when we are talking about consumer utility in economics we are trying to know the size or the measurement that when you consume a commodity what is the volume that you derive from consuming it then how can we understand this better let us look at the concept of utility number one total utility is the total amount of satisfaction a consumer deres from the consumption of a commodity that is when you consume a commodity what is the total amount of satisfaction derived from that commodity there is a way of doing the measurement we are still going to look at that later the second one marginal utility is the additional satisfaction derived by consuming an extra unit of a good now when we say extra unit take for instance somebody is in need of water and if the person get the water maybe from the first b or from a glass cup he will derive a satisfaction taking the first bottle or the first glass if the person requests for more that's the second bottle will come up or second glass taking the second glass it it imply that there will be additional satisfaction that the person would derive from consuming extra unit of that commodity so what we are trying to understand here is that you cannot assume that the satisfaction you derive from the first consumption will be the same with the second consumption there will be a drop that is from the SEC from the first consumption to the second consumption there will be a drw but there is additional satisfaction derived from it so when we are talking about marginal utility we are looking at the the the changes that will occur between the first consumption of a commodity and the second consumption of of that particular commodity is what we are looking into in marginal utility now we are going to look at relationship between total utility and marinal utility using this schedule consumption of water forance units total utility marginal utility the first glass of water the total utility is 20 the change is going to the imin utility will be 20 but the second glass cup of water gives 32 that is the sumission from the first glass to the second glass happen to be 32 in time of measurement the change from between the first glass and the second glass happen to be 12 that is the second glass gave the person just 12 uh increase when you compare with the first one the first glass cup of water the person is able to to derive 20 utility but when it come to the second glass cup of water the utility has dropped the marinal utility has dropped drop although there's an increase in the consumption but the change between the first glass of water and second glass of water is 12 letum the person request for third glass of water where the total utility for the third glass of water is 40 the chain between the second glass and the fourth and the third glass is eight that is the increase that the person has derived from the consumption of that water is eight now the person further in the consumption of water the fourth glass the fourth glass give 42 in time of total utility the change between the thir glass and the fourth glass happen to be two that is the the the satisfaction the person der between the third and the fourth glass of water is just 20 now the person further is consumption asking for the fifth glass of water where the satisfaction is just 40 and the difference between the four glass of water and the fifth glass of water is just zero the implication is that the person has not derived any satisfaction when it took the fifth glass of water so there is no increase in the consumption say the marginal utility is zero now let assume the person move forward to take another glass of water that is the six glass now the utility is 39 so what this thing is telling us that when you take the six glass of water there is no satisfaction at all but but what happened there is disatisfaction so if there is dissatisfaction the difference between the fifth glass and the sixth glass of water indicate minor three that is there is no satisfaction even the person is not even getting himself for taking the glass of water so the implic what we are trying to understand here that as the total utility is increasing the marinal utility is decreasing at a diminishing rate let me repeat as total utility is increasing marginal utility is decreasing at diminish rate but when the total utility gets to Peck the marginal utility is zero so the six glass of water indicate that the total utility is dropping and when the total utility is dropping the marginal utility will be negative graphical relationship between total utility and marinal utility this is utility AIS and this is unit AIS You observe that we have a c here going up and after a point it drops that what we call Total utility that is total utility will be increasing gradually gradually up to a point here that after this point it will drop so it imply that total utility has reached its peak the maximum so after it speak it drop let come to marginal utility C these are marginal utility C that the marginal utility is dropping as the total utility is increasing we have demonstrated that with SK table now want to look at relationship you will see that as utility is growing increasing marginal utility is dropping gradually but when the marginal utility reaches its peak You observe that marginal utility is zero that is at the fifth unit the marginal utility is zero here why total utility is at its peak now when you further the consumption of such commodity the total utility drops what happened to marginal utility it become negative is after zero we have minus that is negative so what we are trying to understand is that the relationship between two util and marginal utility states that as total utility is increasing marginal utility will be decreasing at a diminishing rate but when total utility reaches Peak that we call saturation Point marginal utility will be negative and after the saturation point total utility will decrease that is with drop so what happen to Marginal marginality will become negative what is law of diminishing marginal is ility it states that the satisfaction derived from consuming successive units of a good will diminish as total consumption of the good increases that is a consumer consumes more and more units of a specific good the utility from the successive unit goes on diminish we have demonstrated this with the head of schu and a graph what is consumer equilibrium a consumer maximizes utility at equilibrium level when the marginal utility of the commodity equals the price of the commodity that is marginal utility of commodity X so let assume the commodity is X so if the marginal utility of commodity X is equal to the price of that commodity that is commodity X then consumer is at equilibrium point but where the commodity is more than one is where it involes more than one commodity it will be marginal utility of commodity x/ price of commodity x equal marginal utility of commodity y divided by price of commodity y equal marginal utility of commodity Z ided by price of commodity Z So You observe that it's like we are dividing marginality of commodity X by price of commodity X here so that is what we arrive at so when for Consumer to be at equilibrium it will ensure that the marginal utility of the commodity equals the margin equal the price of the commodity that is the point that consumer can be at equilibrium point examples question one as consumption of beer increases its marginal utility to a drinker will a increase B remain constants c fluctuat d decrease the right answer is D decrease question two by utility will mean a usefulness B power of satisfying a want C beneficial D consumable the right answer is B power of satisfying a want question three in most cases the marginal utility derived from a particular go a increases as additional units are consumed B increases at a decreasing rate as additional units are consumed C decreases as additional units are consumed D remains constant as additional units are consumed the right answer is decreases as additional units are consumed [Applause] [Music]