Cambridge International as and a level Economics Ebook

Utility: 
the satisfaction received from consumption.
Total utility: 
the total satisfaction received from consumption.
Marginal utility: 
the utility derived from the consumption 
of one more unit of the good or service.
KEY TERMS
Th
e marginal utility gained from the consumption of a 
product tends to fall as consumption increases. For example, 
if you buy an ice cream you will get a lot of satisfaction 
from consuming it, especially in hot weather. If you 
consume a second one, you will still get some satisfaction, 
but this is likely to be less than from the fi rst ice cream. 
A third ice cream will yield even less satisfaction. 
SELF-ASSESSMENT TASK 
7.1
1
Table 7.1
 below shows the total utility gained from 
the consumption of lemonade in a week.
Quantity consumed (bottles)
Total utility
0
0
1
20
2
35
3
45
4
53
5
58
6
54
7
48
Table 7.1
a
Calculate the marginal utility as the quantity 
consumed increases.
b
Sketch the total utility and marginal utility 
curves (put utility on the vertical axis, 
quantity consumed on the horizontal axis).
2
If the price of lemonade increases from $1 to 
$2 per bottle, how might it aff ect consumption? 
Explain your answer using the data above.
3 
Comment on how confi dent you are on the 
answer you have provided to question 2.
145
Chapter 7: The price system and the microeconomy 

---

Th
is aspect of consumer behaviour is referred to as the 
law of 
diminishing marginal utility
. As consumption 
increases, there may actually come a point where 
marginal utility is negative, indicating dissatisfaction 
or disutility.