what does the total utility of a basket of goods depends on the quantities of the individual commodities mean?
The total utility of a basket of goods depends on the quantities of the individual commodities refers to the fact that the overall satisfaction or usefulness obtained from consuming a combination of different goods is influenced by the specific amounts of each good consumed. In economics, total utility is a measure of the overall level of satisfaction or happiness that an individual derives from consuming a collection of goods and services.
The specific quantities of each commodity in the basket can impact total utility in various ways. One possibility is that the more of a certain commodity that is consumed, the greater the level of satisfaction or utility obtained. This is referred to as the law of diminishing marginal utility, which suggests that as an individual consumes more of a particular good, the additional satisfaction gained from each additional unit consumed tends to decrease. This means that the first unit of a good consumed provides the most utility, and subsequent units provide progressively diminishing levels of additional utility.
On the other hand, the quantities of different goods in the basket can also interact with each other to affect total utility. The concept of marginal rate of substitution (MRS) comes into play here, which measures the rate at which an individual is willing to exchange one good for another while keeping utility constant. The specific quantities of each good in the basket can influence an individual's preferences and willingness to substitute one good for another, which in turn affects the total utility derived from consuming the basket of goods.
Overall, the total utility of a basket of goods depends on the quantities of the individual commodities due to the law of diminishing marginal utility and the concept of MRS, which both indicate that the specific quantities consumed can impact the level of satisfaction or utility obtained.