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Total utility, marginal utility, and utility maximization

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Can you please explain the concepts of total utility, marginal utility, and utility maximization.

Can you please define diminishing marginal utility and illustrate with two real-life examples - one for a business and one for an individual?

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Solution Summary

This solution defines the concepts of total utility, marginal utility, and utility maximization.

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Total Utility is the overall level of consumer satisfaction by goods or services across all goods and services consumed by the consumer (usually measured in utils).

Marginal Utility is the rate of change in the consumer's overall Utility resulting from a change in the consumption of the good or service.

Utility maximization is the process of obtaining the highest level of utility from the consumption of goods or services which is usually right before the utility begins to diminish as showed in the cd example. The utility maximization would be at cd since utility goes down starting from cd 3.

Law of Diminishing marginal utility as you ...

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