Question

From the following total utility schedule

Qx 0 1 2 3 4 5 6 7

TUx 0 4 14 20 24 26 26 24

a. Derive the marginal utility schedule.

b. Plot the total and the marginal utility schedules.

c. Determine where the law of diminishing marginal utility begins to operate.

d. Find the saturation point.

Answer 1

Solution:

a.). The marginal utility (MUx) = $\frac{\triangle TUx}{\triangle Qx}$

The marginal utility schedule is as below:

 

 

b.). The total and the marginal utility schedules graph are as below:

 

 

c.). The law of diminishing marginal utility begins to operate at Qx = 3. This is where it starts decreasing.

 

d.). The saturation point is at Qx = 6. This is the point where MUx = 0 and Tux starts to decrease.