Final answer:
Total utility increases at a diminishing rate as more units of a good are consumed and then falls after a maximum point is reached. This is explained by the law of diminishing marginal utility, where each additional unit consumed provides less utility than the previous one, affecting consumer decisions.
Step-by-step explanation:
The question addresses the concept of diminishing marginal utility, which is a fundamental principle in economics. The correct completion of the blank spaces in the student's question would be: Total utility increases at a diminishing rate as more unit of a good are consumed, reaches a maximum then falls.
The law of diminishing marginal utility states that as a person consumes more units of a good, the satisfaction (utility) gained from consuming each additional (marginal) unit decreases. For example, if José picks his first T-shirt, he might obtain a high level of satisfaction (22 utils), but by the time he chooses a fourth T-shirt, the satisfaction derived from it may only be worth 18 utils. Thus, while total utility continues to increase, each additional unit adds less to the total utility than the previous one, until a point is reached where the total utility starts to decline.
Understanding the law of diminishing marginal utility is crucial because it affects consumer choice and decision-making. It's important to recognize that after reaching the peak of total utility, the overall satisfaction from consuming additional units begins to decrease.