how to calculate total utility
each individual unit of a good or service has its own utility and each additional unit of consumption will have its own marginal utility the total utility will be the aggregated sum of utility gained from all units being studied satisfaction is a subjective measure and will vary from individual to individual meaning that total utility acts more as a guide in understanding a consumer s psychological decisions 1a total utility formula will include utils utils are typically relative and assigned a base value economists usually analyze utils across a spectrum to provide a comparative analysis of the amount of util or satisfaction gained from a unit of consumption an assigned base value for utils is needed because theoretically there is no real value for utility satisfaction in general to find total utility economists use the following basic total utility formula tu u1 mu2 mu3 tu total utilityu utilitymu marginal utilitythe total utility is equal to the sum of utils gained from each unit of consumption in the equation each unit of consumption is expected to have slightly less utility as more units are consumed total utility maximizationeconomic theory regarding consumer activities suggests that the primary goal of the consumer is to achieve the largest amount of utility for the least amount of cost this is partly due to the limited amount of funds a person may possess as well as a desire to achieve as much satisfaction from the consumption of goods and services as possible 1for example if a consumer is presented with two purchasing options with the same financial cost and neither option is more necessary or functional than the other the consumer will choose the good or service that provides the most utility for the money example of total utilityjohn is hungry and decides to eat a chocolate bar his total utility from eating one chocolate bar is 20 utils he is still hungry so he eats another chocolate bar where his total utility is 25 utils john is still hungry and has two more chocolate bars the third chocolate bar has a total utility of 27 utils and the fourth has a total utility of 24 utils this is best represented in the table below with each additional chocolate bar john s total utility increases until it reaches its max at three chocolate bars with the fourth chocolate bar john s total utility decreases this can be understood with marginal utility the utility that john derives from each additional chocolate bar with every additional chocolate bar after the first john s marginal utility is decreasing meaning that he is deriving less satisfaction from another chocolate bar this makes sense as he is getting more full with each bar after the third bar his marginal utility is negative meaning he is deriving no satisfaction and in fact is made worse off perhaps feeling sick after consuming so much chocolate and sugar total utility faqstotal utility is the aggregate satisfaction that an individual receives from consuming a specific quantity of a good or service while total utility measures the aggregate satisfaction an individual receives from the consumption of a specific quantity of a good or service marginal utility is the satisfaction an individual receives from consuming one additional unit of a good or service if marginal utility is positive then total utility will increase once marginal utility is negative then total utility will decrease the basic formula to calculate total utility is as follows tu u1 mu2 mu3 tu total utilityu utilitymu marginal utilitymarginal utility is calculated as follows mu change in total utility change in unitstotal utility does not always increase when marginal utility is negative then total utility will decrease this means that an individual does not derive any satisfaction from the consumption of an additional unit of a good or service and is worse off by doing so the bottom lineutility measures the satisfaction an individual receives from the consumption of a good or service total utility measures the total satisfaction from a specific quantity of goods or services total utility operates hand in hand with marginal utility which measures the additional satisfaction received from the consumption of a good or service as long as marginal utility is positive total utility will increase once marginal utility is negative then total utility will decrease economists aim to study total utility and marginal utility to understand consumer behavior consumer behavior helps to predict the demand for goods and services which impacts supply and their prices all key metrics of analyzing an economy 