Eco-Concept of Utility
Utility means want satisfying power of a commodity. It refers to power or capacity of a commodity to satisfy human wants. In order to know whether a commodity possesses utility or not, we have to ask two questions:
a) Does commodity satisfy the want of people?
b) Are people ready to pay for it? If answers to these questions are affirmative then we can say that a commodity possesses utility, otherwise not. It is a measure of personal satisfaction or level of meeting a need that a good or service meets. For example, commodity like food, cloth, table, chair, etc. satisfies our wants. So, we can say that they have utility. Similarly services like services of a doctor, teacher, C.A., lawyer, musician, etc. also posses utility because they can satisfy our wants.
Let’s take one more example..!!
The initial cup of coffee in the morning meets a large need and provides a large amount of satisfaction (utility). Another example is going under water and holds your breath, keep holding it until you think you will pass out. Then come up out of the water, that first breath is wonderful tremendous utility. That is utility - the meeting of a need or being satisfied.
Marginal Utility:
Marginal utility means the utility available from an additional unit of a commodity. In other words, marginal utility means addition to total utility (or change in total utility) due to increase in consumption by one more unit.
Therefore, MUx=TUn-TUn-1
Total utility:
The aggregate level of satisfaction or fulfilment that a consumer receives through the consumption of a specific good or service. Total utility means summation of marginal utility of all the units of a commodity.
Therefore,
a) Does commodity satisfy the want of people?
b) Are people ready to pay for it? If answers to these questions are affirmative then we can say that a commodity possesses utility, otherwise not. It is a measure of personal satisfaction or level of meeting a need that a good or service meets. For example, commodity like food, cloth, table, chair, etc. satisfies our wants. So, we can say that they have utility. Similarly services like services of a doctor, teacher, C.A., lawyer, musician, etc. also posses utility because they can satisfy our wants.
Let’s take one more example..!!
The initial cup of coffee in the morning meets a large need and provides a large amount of satisfaction (utility). Another example is going under water and holds your breath, keep holding it until you think you will pass out. Then come up out of the water, that first breath is wonderful tremendous utility. That is utility - the meeting of a need or being satisfied.
Marginal Utility:
Marginal utility means the utility available from an additional unit of a commodity. In other words, marginal utility means addition to total utility (or change in total utility) due to increase in consumption by one more unit.
Therefore, MUx=TUn-TUn-1
Total utility:
The aggregate level of satisfaction or fulfilment that a consumer receives through the consumption of a specific good or service. Total utility means summation of marginal utility of all the units of a commodity.
Therefore,