Basic Terms and Concepts of Economics- Part 1
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Explain the term Marginal Utility.Marks:1
Marginal utility is the additional utility derived from consumption of one more unit of the commodity.
for example Reeta gets10 units of utility from consumption of 1 unit of chocolate and 16 units of utility from consumption of second unit of chocolate.
MU2 = TU1 - TU2
Then, the marginal utility is 16 - 10 units of utility.
What is the meaning of Total Utility (TU)?Marks:1
Total utility is the sum of all utilities derived from consumption of certain number of units of a particular good. The formula for total utility is
TU = MU1 + MU2 + MU3 +……. + MUn
Write any four features of utility.Marks:1
The following are the four features of utility:
- Utility is subjective.
- Utility has no real existence.
- Utility is relative.
- Utility is not measurable.
Utility is independent of Morality. Comment.Marks:1
Utility has no connection with morality. For example, the use of opium is not considered as morally correct still it satisfies the wants of an opium taker.
In economics the term good has different meaning from that of commodity. comment.Marks:1
The term “goods” implies the tangible or physical commodities that can be touched or seen and has the ability to satisfy the human wants.
We use term commodity to refer to goods and services that satisfy human wants and has exchange value. By a service, we mean an item which is not physically tangible but satisfies human wants.
Thus, in economics this distinction can be made on the basis of tangibility.