Total Utility

AAA

DEFINITION of 'Total Utility'

The aggregate level of satisfaction or fulfillment that a consumer receives through the consumption of a specific good or service. Each individual unit of a good or service has its own marginal utility, and the total utility is simply the sum of all the marginal utilities of the individual units. Classical economic theory suggests that all consumers want to get the highest possible level of total utility for the money they spend.

INVESTOPEDIA EXPLAINS 'Total Utility'

To better understand total utility, one must understand the law of diminishing marginal utility, which states that as more of a single good or service is consumed, the additional (marginal) satisfaction drops. The first good consumed provides the highest marginal utility, the second good has a lower marginal utility, and so on. Therefore, total utility grows less rapidly with each additional unit of the same good or service.

In order to maximize total utility (which is the inherent goal of all consumers), consumers will look to combine different combinations of goods and services. Given their limited resources (money), consumers will make choices in an attempt to increase their total utility with each additional unit of consumption.

RELATED TERMS
  1. Marginal Utility

    The additional satisfaction a consumer gains from consuming one ...
  2. Utility

    1. An economic term referring to the total satisfaction received ...
  3. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  4. Law Of Diminishing Marginal Utility

    A law of economics stating that as a person increases consumption ...
  5. Intertemporal Choice

    An economic term describing how an individual's current decisions ...
  6. Expected Utility

    An economic term summarizing the utility that an entity or aggregate ...
Related Articles
  1. How Influential Economists Changed Our ...
    Fundamental Analysis

    How Influential Economists Changed Our ...

  2. The Uncertainty Of Economics: Exploring ...
    Economics

    The Uncertainty Of Economics: Exploring ...

  3. A Practical Look At Microeconomics
    Economics

    A Practical Look At Microeconomics

  4. Explaining The World Through Macroeconomic ...
    Options & Futures

    Explaining The World Through Macroeconomic ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center