(1) The relationship between the total utility and the marginal utility.
Total utlity is the total satisfaction that a person receives from consuming or using certain goods and services. Marginal utillity is the additional satisfaction that a person receives from consuming one additional unit of a certain good or services.
Total utility can increase in a decreasing rate from consuming of additional units due to declining marginal utility. A person may enjoy consuming the first unit of good but it may not be that enjoyable for the subsequent units that he consumes. As the person consumes more of the good, the satisfaction from additional units declines. Total utility may increase but it is increasing at a decreasing rate due to declining marginal utility.
(2) Can marginal utility be negative?
Yes, the marginal utliity can be negative. Marginal utility can be negative when the consumption of an additional item decreases the total utility. This means that a person is not longer enjoying the consumptions of the good anymore. Instead, he is starting to feel irritated or even fall out of favour with the good.
(3) Examine the diamond-water paradox. Why are diamonds more expensive than water?
Diamond water paradox is when the essential thing for human survival, water, is very cheap whereas the functionally useless for human survival, diamond, is very expensive. This is explained using the Law of diminishing utility.
The diamonds are very expensive because the supply of the diamond is very little and there unproportionate demand for diamond. There are many people who wish to buy the diamond. This leads to the diamonds being very expensive.
For the water, it is explained in the article by Farah Mohammad’s article that the higher the supply of a particular good that we have and the more we consume it, the less we value it. Water is being used reckless in many means and it is not valued as high as the diamond. This leads to it value being low.
(4) Examine the law of diminishing marginal utility.
The law states that the marginal utility or satisfaction declins as one more additional unit of good is consumed. As a person increased the consumption of one good, the person becomes less interested in consuming additional units and the satisfaction or utility declines.
(5). Some items which might not follow the law of marginal utility could be (1) old collectable coins, (2) expensive paintings.
The collector of the ancient currencies and coins may be happy with collecting one additional unit of coins but the collector will never be satisfied with just one or two coins which he buys. He may want to collect more and more without limitations. For expenisve paintings, the collector may also not want to stop collecting after 1 or 2 units, but also keep going because each additional painting gives satisfaction.
(6) Law of diminshing marginal utility says that there is a decline in marginal utiilty as more units are consumed. Therefore, as we have plenty of water and consume more of the water at our disposal, we will not value the importance of water and take it for granted. As dia