A Business Encyclopedia

“Utility” in Economics

Definition: The “Utility” in Economics means the satisfaction derived or expected to be derived from the consumption of goods and services.

The concept of “utility” in economics can be understood in two broad perspectives: from the product’s perspective and the consumer’s perspective. From the product’s perspective, it can be defined as the want-satisfying property of the commodity. From the consumer’s perspective, it means a psychological feeling of pleasure, satisfaction, well-being, happiness which consumer expects to derive from the possession, consumption and the use of the commodity.

There is a fine difference between these two concepts of utility. The want-satisfying property of the commodity is absolute since the utility is very much embedded in the product, irrespective of one needs it or not. For example, Stethoscope has its own utility irrespective of one is a doctor or not. On the other hand, the utility from the consumer’s point of view is the post-consumption phenomena as one can derive satisfaction from the commodity only when he uses it. Thus, the utility in this sense is a subjective or relative concept. The utility is said to be subjective because of the following reasons:

  • The commodity may not be useful for all, such as books will have no utility for the illiterates.
  • The utility varies from person to person and from time to time.
  • The consumer may not derive the same utility from the consumption of the same commodity at different points of time, at different buying levels and for different moods.

Thus, we can say that utility is the satisfaction that the consumer seeks to obtain from the consumption of goods and services, and while for a product, it is the ability to satisfy the wants of the consumers.

Leave a Reply

Your email address will not be published. Required fields are marked *


Related pages

importance of industrial relations pptexamples of goods with elastic demandasset management ratios definitiontraveller cheque definitionproduction function in managerial economicswhat is the formula for inventory turnovercentral bank definition economicscurrency speculatorsassets turnoverherzberg theoriesconvertible debenturesmerrick systemscobb douglas production function graphadvantages and disadvantages of linear programmingpure market definitiondifference between cluster and stratified samplingexplain managerial gridfeatures of promissory notecluster sampling technique definitiontridimensional theorymeaning of cash budgettypes of ethical theorieswhy are marketing channels and intermediaries necessaryporters five force modelq sort scalemeaning of homogeneous in hindiexplain demand functionsimplex algorithm stepsbusiness process redesign stepsdefinition of horizontal communicationsituational variables in leadershipcapital budgeting decision criteriapaired comparison techniquewww demat accountwhat is debtors turnoveransoff product developmenttypes of deficit financingmeaning of teleological ethicswhat is finance lease and operating leasemeaning of autocraticmeaning of seasonal unemploymentmultistage cluster samplingmeaning of providentmanagement principles of henri fayolpsychoanalytic theory of personality definitionwhat is a franchisersales force automation in crmproduction function in managerial economicspersonal selling process definitionmax weber hierarchywhat is the diminishing marginal utilityadvantages of vestibule trainingfeatures of marginal costingneft transfer timingsblakes managerial gridprovident fund indialinear programing problemsdefinition of pluralistmoratorium meaning in teluguwhat is ethnocentric approachhindi meaning of vagueexplain the law of diminishing marginal returnsteleological ethical theory definitionpsychoanalysis meanssemantic barriers examplesmarketing hype definitionhirer and hireefactors influencing purchase decisionnps fund managersitc product mixjob evaluation methods examplesmeaning of chitjob rotation training methodguerrilla warfare marketingbf skinner theory of reinforcementmonetizing the debt definitionwhat is captive pricing