(a). Define slope of total utility curve.
(b). Explain law of diminishing marginal rate of substitution with help of table and diagram.
(a) Slope of Total utility refers to change in utility due to consumption of one more unit of a commodity. This is termed as Marginal Utility. Marginal utility is the addition to total utility due to consumption of an additional unit of commodity.
MUn = TUn – TUn – 1
(b) If a consumer prefers a consumption bundle that has comparatively more of good 1 and less of good 2, the according to the Diminishing Marginal Rate of Substitution, the amount of good 2 a consumer is ready to give up for an additional unit of good 1 declines or diminishes with successive increase in amount of good 1. In other words, if the consumer consumes more and more of good 1, then his/her willingness to sacrifice good 2 for additional units of good 1 will go on diminishing, that is, as the amount of good 1 increases, the rate of substitution between good 1 and good 2 falls.