Thursday, 27 April 2017

Understanding Utility

The study of the concept of utility is a part of Micro Economics.  Micro Economics is a branch of economics which deals with the behavior of individual units of an economy like individual demand, individual prices, individual industries etc.

For a layman, utility means usefulness. However, for economics, the utility is the want-satisfying power of a particular commodity. For example, food, clothing, and shelter have utility for everyone as everyone has a want for these.

Features of Utility-

Relative concept - Utility of a particular commodity changes from time to time and place to place. For example, the utility of umbrella is higher during monsoon season than in any other season. Similarly, the utility of woolen clothes is more in parts of the country which are cold. For example, woolen clothes have more utility in Shimla & Manali than in Chennai

Subjective concept - Utility of a particular commodity is not same for all the individuals. It differs from person to person. For example, the utility of a book is greater for an educated person than an illiterate person

Ethically Neutral - Study of Ethics deals with the study of what is good & what is bad, what is moral & what is immoral. The utility has nothing to do with ethics. Any commodity which has a want-satisfying power has utility. For example, Knife has utility in cooking at the same time it has utility for a murderer also

Utility and usefulness are not one and the same - Utility is different from usefulness. A commodity may have utility, but it may not be useful. For example, cigarette has a utility for a smoker, but it is not useful to him as it is injurious to health

Utility and pleasure are not one and the same - The commodity which has utility may not be pleasurable. For example, medicines/injections have utility during illness but are not pleasurable

Utility differs from satisfaction - Utility and satisfaction are two different terms. Satisfaction is the feeling that you get after consumption of a particular commodity. On the other hand, utility means expected satisfaction from a particular commodity

Not measurable - You cannot measure utility. You can just experience it. You can just feel it, but you cannot express utility in numeric terms

Depends upon the intensity of want - For example, water has more utility for you when you are thirsty whereas its utility reduces if you are not thirsty.

Utility Forms Basis of demand - There will be a demand for a particular commodity only if it has utility. A person with short/long sightedness will have a demand for spectacles, but one who doesn't have any vision problem will have no demand for it

No comments:

Post a Comment