Concept of Utility
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.