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UI Post-UTME Economics 2025 (Model questions) Question 11

Question 11

Theory of Consumer Behaviour

The table below shows the total utility (TU) of a consumer from consuming units of a good: Units: 1, 2, 3, 4, 5 TU: 20, 36, 48, 56, 60. Which of the following statements are CORRECT?
I. Marginal utility at the 3rd unit is 12
II. Marginal utility is declining throughout
III. The consumer reaches saturation at 5 units
IV. The law of diminishing marginal utility is illustrated

  1. A.I, II and IV only
  2. B.I and III only
  3. C.II, III and IV only
  4. D.All of the above
Show the answer and explanation

Answer: A (I, II and IV only)

Explanation

MU = 20, 16, 12, 8, 4: it is 12 at the 3rd unit and keeps falling, showing diminishing marginal utility. Saturation needs MU = 0, but MU at the 5th unit is still 4.