Concept of Utility

Introduction Existence of human wants forms the basis of all economic activities. Want refers to an effective desire for a particular commodity by a human being who gets satisfied after making an effort to acquire it. The characteristics of wants are: Wants are multiple and multiply with time Wants are satiable. Wants are competitive. Wants are alternative. Wants are influenced by advertisement. Wants are repetitive and Wants are relative. Wants can be classified into three heads necessaries, comforts and luxuries. Utility refers to the power of a commodity to satisfy human wants. The features of Utility are: Utility is subjective. Utility is abstract. Utility is independent of morality and ethics. Utility is relative. Utility is not same as usefulness. Utility varies with intensity of want Utility is different from pleasure. Utility is multipurpose. Utility cannot be objectively measured Utility can be expressed in terms of money. The main forms of utility are: Form utility, time utility, place utility and service utility. The three concepts of utility which are widely used in economics are: Initial Utility, Total Utility (TU) and Marginal Utility (MU). Initial Utility refers to the utility derived from the consumption of the first unit of a commodity. Total Utility is defined as the total satisfaction obtained by the consumer from the consumption of all units at a time. Marginal Utility is the addition made to the total utility by consuming one or more unit of a commodity.

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  • Q1

    What you say about total utility when the marginal utility is zero?

    Marks:2
    Answer:

    When the marginal utility is zero, total utility is maximum. It is the satiation point beyond which total utility starts falling.

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  • Q2

    How the utility is different from pleasure?

    Marks:2
    Answer:

    A commodity can have utility whether it gives pleasant experience to the consumer or not. For example: A dose of injection is not pleasant but it has utility. For example: A small girl may not derive pleasure from a polio vaccine. It safeguards people from long term dire consequences and hence, has utility.

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  • Q3

    Utility is independent of morality and ethics. Comment.

    Marks:2
    Answer:

    Utility derived from the commodity is irrespective of the morality, ethics and social justice. For example: Stealing is an immoral act, socially undesirable but it gives utility to the thief. Hence, utility is independent of morality and ethics.

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  • Q4

    How the utility is multipurpose?

    Marks:2
    Answer:

    There are several commodities which can be used for multi-purposes. For example: milk is a commodity that can be used for several uses. We use milk to prepare ice-cream, curd, milkshakes, rasmalai or chocolate cookie. All these commodities which contain milk provide satisfaction and have utility, just as milk does, sometimes even more.

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  • Q5

    Write down the main features of utility.

    Marks:3
    Answer:

    The features of utility are as follows:

    1. Utility is subjective: Utility differs from person to person. The same cone of ice-cream gives more utility to you than your friend.

    2. Utility is abstract: It is a thought or feeling that varies in intensity from time to time and has no concrete existence. You get utility from your i-pod when you are less burdened with studies, especially when exams are over.

    3. Utility is independent of morality and ethics: Stealing is an immoral act, socially undesirable but it gives utility to the thief. Hence, utility is independent of morality and ethics.

    4. Utility is relative: Utility varies with place, time and person, just like wants. Water gives more satisfaction in summer than in winter.

    5. Utility is not same as usefulness: Chocolate lovers derive lot of satisfaction from eating chocolates. But, it affects teeth adversely. Chocolates pose utility though it is not useful for teeth.

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