Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

CHAP. 4] CONSUMER DEMAND THEORY 63
EXAMPLE 2. If we plot the total and marginal utility schedules of Table 4.1, we get the total and marginal utility curves
of Fig. 4-1. Since marginal utility has been defined as the change in total utility in changing consumption by one unit, each
value of the MU x has been recorded midway between the two levels of consumption, in part (b) of the figure. The saturation
point (MU x ¼ 0) is reached when the individual increases consumption of X from 5 to 6 units. The falling MU x curve
illustrates the principle of diminishing marginal utility.
Fig. 4-1
4.2 CONSUMER EQUILIBRIUM
The objective of a rational consumer is to maximize the total utility or satisfaction derived from spending
personal income. This objective is reached and the consumer is said to be in equilibrium when able to spend
personal income in such a way that the utility or satisfaction of the last dollar spent on the various commodities
is the same. This can be expressed mathematically by
subject to the constraint that
MU x
P x
¼ MU y
P y
¼
P x Q x þ P y Q y þ¼M (the individual’s income)