A Business Encyclopedia

Total Utility

Definition: The Total Utility refers to the sum of utility that an individual derives from the consumption of all the units of a given commodity at a point or over a period of time.

In other words, the total satisfaction derived from the consumption of various units of goods and services is called total utility. Every unit of a commodity has its marginal utility (a utility derived from the consumption of an additional unit), and the total utility is the summation of all these individual marginal utilities.

Suppose a consumer consumes four units of commodity X at a point of time and derives utilities from the successive consumption of units as u1, u2, u3, u4, then the total utility from the consumption of commodity X can be measured as follows:

Ux = u1+u2+u3+u4

If the consumer consumes ‘n’ number of commodities, then the utility derived from the consumption of each commodity, let’s say, X, Y and Z are Ux, Uy, Uz. The total utility is the sum of utilities of each individual commodity and hence is measured as:

TUn = Ux + Uy +Uz

Within the given limited resources (money), the consumer tries to consume different combinations of goods and services in order to maximize his total utility. Generally, people seek to maximize their utility for the amount of money; they spend on the purchase of the goods and services.

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