marginal utility and producers theory.pptx

8/14/2019 Marginal Utility and Producers Theory.pptx

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MarginalUtility


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What do People want from life


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Of course Money, Good House, car, Education etc..


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He Loves Cake


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Infinite Supply of Cakes


7/34Infinitely Happy


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The Answer is

NOwhy?

Because of


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Law of Diminishing Marginal Utility

the additional utility which a person derive from the consumption a commodity

diminishes, that is Total Utility increase at an diminishing rate

Unit of

Cake

Total

Utility

Marginal

Utility

1 10

2 20

3 29

4 37

5 43

6 48

7 51

8 52

9 52

10 50

MUn= TUnTUn-1


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Unit of

Cake

Total

Utility

Marginal

Utility

1 10 10

2 20 10

3 29 9

4 37 8

5 43 6

6 48 5

7 51 3

8 52 1

9 52 0

10 50 -2


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Unit of

Cake

Total

Utility

Marginal

Utility

1 10 10

2 20 10

3 29 9

4 37 8

5 43 6

6 48 57 51 3

8 52 1

9 52 0

10 50 -2

TU

MU

No of Cake

No of Cake

TU

MU


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TU

MU

Saturation Point MU =0 or TU is maximum

TU

MU

No of Cake

No of Cake


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If we go oneating cake after

Achieving zero

utility from it

,It may result in

Negative Utility


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Producers Theory


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What do Producers

want from Business?


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Answer is Simple to

Generate a lot ofRevenue


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How Much

Resource is

to be added

that is very

Important


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Suppose I have a business

And these are my tool for

running the business


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So I hire a worker

Vikash


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Employee Total Product Marginal Product

Zero Employee 0 0

Vikash 6 6


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I hire another worker Anushree


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Employee

Total

Product

Marginal

Product

Zero Employee 0 0

Vikash 6 6

Anushree 14 8


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Hiring of third workerNeha Agarwal


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Zero Employee 0 0

Vikash 6 6

Anushree 14 8

Neha Agarwal 21 7


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Hiring of forth Employee

Neha Bharti


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Zero Employee 0 0

Vikash 6 6

Anushree 14 8

Neha Agarwal 21 7

Neha Bharti 24 3


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Seeing the Rise in Production

make the Employer happy

Benevolent Dictator Mrigank


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On hiring the fifth workerKriti


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Employee Total Product Marginal ProductZero

Employee 0 0

Vikash 6 6

Anushree 14 8

Neha 1 21 7

Neha 2 24 3

kriti 22 -2


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Reduction in Total Product After

hiring the 5th

worker makes theEmployer Unhappy

Benevolent Dictator Mrigank


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Question arises that whyall this happens?


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Reasons:

Though all the employee had similar

skills but there was reduction in the

total product because of lack of other

resources like computers ,tool, machines

other resources which are necessary for

the running of business.


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0

5

10

15

20

25

30

Total Product

Total Product


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-4

-2

0

2

4

6

8

10

Vikas Anushree NehaAgarwal

NehaBharti

Kriti

Marginal Product

Marginal Product

marginal utility and producers theory.pptx

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