Explain the term total utility
Total utility is a concept in economics that refers to the total satisfaction or benefit that a consumer derives from consuming a particular set of goods or services. It is the sum of all the utility or satisfaction gained from each unit of a good or service consumed.
Total utility is influenced by the law of diminishing marginal utility, which states that as the quantity of a good consumed increases, the marginal utility (additional satisfaction) derived from each additional unit decreases. This means that although total utility may increase as more units of a good are consumed, the rate at which it increases will eventually slow down.
Understanding total utility is important in consumer theory as it helps economists analyze consumer behavior, preferences, and decision-making processes. By determining the total utility consumers derive from different goods and services, economists can better understand how consumers allocate their resources and make choices to maximize their overall satisfaction.