Utility Analysis: 

Utility is a persons measure of well being or satisfaction. The law of diminishing marginal utility states that the more of any item a person has, the less utility or satisfaction he will get from obtaining one more unit of that item. Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility on the other hand is the total satisfaction from the consumption of a product. Hence total utility is the total satisfaction which a consumer derives from the consumption of a particular good over a period of time. For example, a person consumes five units of a commodity and derives U1, U2, U3, U4, U5 utility from the successive units of a good, his total utility will be TU = U1 +U2 +U3 +U4+ U5

Marginal utility is the additional satisfaction which a consumer gets from consuming additional unit of a good. More precisely, it is defined as the, addition to the total utility obtained from the consumption of one more unit. For example, the marginal utility of second glass of water is the change in total utility resulting from consuming the second glass of water.

Total utility rises, but at a decreasing rate. The slope of the function at any point is

Rise/run = the change in utility/the change in the quantity of Good X

If the change in the quantity equals one, then the slope equals the marginal utility, which is the change in the utility from obtaining one more unit of the good. Marginal utility decreases as more units of Good X are acquired, which is indicated by the decreasing slope. As a person consumes more and more units of a commodity, the marginal utility of the additional units begins to diminish or reduce but the total utility goes on increasing at a diminishing rate. When the marginal utility comes to zero or the point of satiety is reached, the total utility will be maximum. It is assumed that all consumption is aimed at utility maximization.