Lesson Note on Utility Theory: Meaning, Marginal Utility and Diminishing Utility for SS 2

Class: Senior Secondary School 2 (SS2 / SSS2)
Term: Second Term
Week: 2
Age: 16 years
Duration: 45 minutes
Subject: Economics
Curriculum Theme: Consumer Behavior
Previous Lesson: Labour Market: Unemployment and Self Employment.
Topic: ELEMENTARY TREATMENT OF UTILITY THEORY
Subject Matter: Meaning of utility (satisfaction from consumption), total utility, average utility, marginal utility, law of diminishing marginal utility.

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

• Define utility, total utility, average utility, and marginal utility.
• State the law of diminishing marginal utility.

Affective Domain:

• Appreciate the importance of utility theory in understanding consumer choices.
• Relate utility concepts to their daily consumption decisions.

Psychomotor Domain:

• Calculate total utility, average utility, and marginal utility from a given schedule.
• Draw and interpret graphs of total and marginal utility.

Social Domain:

• Discuss the application of utility theory in real-life consumer scenarios.

Reference Materials

The following resources were used in planning this lesson:

• Senior Secondary Schools Education Curriculum
• State Unified Scheme of Work
• Any approved Senior Secondary School Economics Textbook (e.g., A. L. Garba, “Comprehensive Economics for Senior Secondary Schools”)
• [link_1]
• [link_2]

Instructional Materials

The teacher will teach this lesson with the aid of:

• Drinkable water
• Soft drinks
• Cups
• Graphs of utility curves
• A utility schedule on a chart or whiteboard

Rationale for the Lesson

Understanding utility theory helps pupils to grasp how consumers make choices to maximize satisfaction from limited resources. This knowledge enables pupils to analyze their own consumption patterns and understand market demand better.

Prerequisite/Previous Knowledge

Pupils have basic knowledge of economic concepts such as wants, scarcity, choice, and demand.

Lesson Content/Board Summary

ELEMENTARY TREATMENT OF UTILITY THEORY

Meaning of Utility

Utility refers to the satisfaction or pleasure derived by a consumer from consuming a good or service. It is the ability of a good or service to satisfy a human want.

Types of Utility

The following are the types of utility:

• Total Utility (TU): This is the total satisfaction a consumer obtains from consuming all units of a particular commodity at a given time.
  
  Formula: TU = ΣMU (Sum of Marginal Utilities)
• Marginal Utility (MU): This is the additional satisfaction gained from consuming one more unit of a commodity. It is the change in total utility resulting from a one-unit change in consumption.
  
  Formula: MU = ΔTU / ΔQ (Change in Total Utility / Change in Quantity)
• Average Utility (AU): This is the total utility divided by the total number of units consumed. It represents the satisfaction per unit of the commodity.
  
  Formula: AU = TU / Q (Total Utility / Quantity)

Law of Diminishing Marginal Utility

The Law of Diminishing Marginal Utility states that as a consumer consumes more and more units of a specific commodity, the additional satisfaction (marginal utility) derived from each successive unit tends to decrease, assuming other factors remain constant.

Example: When a thirsty person drinks successive glasses of water, the first glass provides great satisfaction. The second glass provides less satisfaction than the first, the third even less, and so on, until additional glasses provide no satisfaction or even dissatisfaction.

Utility Schedule and Calculation

A utility schedule is a table showing the total utility, marginal utility, and average utility derived from consuming different quantities of a good.

Example: Calculating Utility from a Schedule

Worked Example 1: Calculating Marginal Utility (MU)

Given the Total Utility (TU) values from the schedule above:

• Step 1: Calculate MU for the 2nd unit.

  MU = TU at Q=2 – TU at Q=1

  MU = 18 – 10 = 8 units

• Step 2: Calculate MU for the 4th unit.

  MU = TU at Q=4 – TU at Q=3

  MU = 28 – 24 = 4 units

Worked Example 2: Calculating Average Utility (AU)

Given the Total Utility (TU) and Quantity (Q) values from the schedule above:

• Step 1: Calculate AU for the 3rd unit.

  AU = TU at Q=3 / Q=3

  AU = 24 / 3 = 8 units
• Step 2: Calculate AU for the 5th unit.

  AU = TU at Q=5 / Q=5

  AU = 30 / 5 = 6 units

Graphs of Utility

The relationship between total utility and marginal utility can be shown graphically:

• Total Utility Curve: Typically rises at a decreasing rate, reaches a maximum (when MU is zero), and then starts to fall (when MU is negative).
• Marginal Utility Curve: Generally slopes downwards, intersecting the x-axis when total utility is at its maximum, and then becoming negative.
• Point of Saturation: This is the point where total utility is maximum and marginal utility is zero. Consuming beyond this point leads to disutility.

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 3 minutes
Teaching Skill: Set Induction
Teacher’s Activity: The teacher greets the pupils and asks them what gives them satisfaction when they consume goods like food or drinks.
Pupils’ Activity: Pupils respond by mentioning satisfaction, pleasure, or happiness from consumption.
Learning Point: Pupils are introduced to the concept of satisfaction from consumption.

Step 2: Meaning of Utility

Time: 5 minutes
Teaching Skill: Explanation
Teacher’s Activity: The teacher explains the meaning of utility as the satisfaction derived from consuming goods and services, relating it to the pupils’ earlier responses.
Pupils’ Activity: Pupils listen attentively and take notes on the definition of utility.
Learning Point: Pupils understand the core definition of utility.

Step 3: Total, Average, and Marginal Utility

Time: 8 minutes
Teaching Skill: Explanation/Illustration
Teacher’s Activity: The teacher defines and explains total utility, average utility, and marginal utility, giving simple examples for each.
Pupils’ Activity: Pupils listen, ask questions for clarification, and copy the definitions into their notebooks.
Learning Point: Pupils differentiate between total, average, and marginal utility.

Step 4: Law of Diminishing Marginal Utility

Time: 5 minutes
Teaching Skill: Demonstration/Explanation
Teacher’s Activity: The teacher uses the instructional materials (water, soft drinks, cups) to demonstrate the law of diminishing marginal utility, explaining how satisfaction decreases with each additional unit consumed.
Pupils’ Activity: Pupils observe the demonstration and provide their own real-life examples of diminishing marginal utility.
Learning Point: Pupils understand and can explain the law of diminishing marginal utility with examples.

Step 5: Calculation of Utility

Time: 10 minutes
Teaching Skill: Demonstration/Problem Solving
Teacher’s Activity: The teacher presents a hypothetical utility schedule on the board or chart and guides the pupils through step-by-step calculations of total utility, marginal utility, and average utility, similar to the board summary example.
Pupils’ Activity: Pupils actively participate by computing the missing values in the schedule and solving additional problems given by the teacher.
Learning Point: Pupils develop skills in calculating different types of utility from a schedule.

Step 6: Graphing Utility

Time: 4 minutes
Teaching Skill: Illustration/Guidance
Teacher’s Activity: The teacher guides the pupils on how to plot the total utility and marginal utility curves from the schedule, highlighting the relationship between the two curves.
Pupils’ Activity: Pupils observe the graph plotting and attempt to sketch the curves in their notebooks.
Learning Point: Pupils understand how to graphically represent utility concepts.

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. Define utility.
2. Distinguish between total utility and marginal utility.
3. State the law of diminishing marginal utility.
4. Given a quantity of 4 units and a total utility of 28, calculate the average utility.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 5 minutes
Teaching Skill: Summarization/Assignment
Teacher’s Activity: The teacher summarizes the key points of the lesson and assigns homework: “Draw a utility schedule and graph showing total utility and marginal utility for consuming up to 8 units of a good of your choice.”
Pupils’ Activity: Pupils listen to the summary and copy down the homework assignment.
Learning Point: Pupils consolidate their understanding and apply learned concepts.

Lesson Keywords

• Utility – The satisfaction or pleasure derived from consuming a good or service.
• Total Utility – The overall satisfaction from consuming all units of a commodity.
• Marginal Utility – The additional satisfaction from consuming one more unit.
• Average Utility – Total utility divided by the quantity consumed.
• Law of Diminishing Marginal Utility – The principle that successive units of a good yield less additional satisfaction.

Differentiation

For struggling learners, the teacher will provide simpler utility schedules with fewer units and offer more one-on-one guidance during calculations. For advanced learners, the teacher will encourage them to analyze real-world scenarios where the law of diminishing marginal utility applies and discuss its implications for consumer behavior.

Note for teachers using this lesson plan

Ensure pupils grasp the difference between total, average, and marginal utility, as this is fundamental to understanding consumer behavior in economics. Emphasize the practical application of the law of diminishing marginal utility with relatable examples. Encourage pupils to draw their own utility graphs to reinforce visual understanding.