Utility refers to want satisfying power of a commodity.
In objective terms, utility may be defined as the “amount of satisfaction derived from a commodity or service at a particular time”.Utility is represented in units called utils
- Utility can be measured.
- Marginal Utility of money remains constant
- No change in income of the consumer, his taste & fashion to be constant
- No substitute
- Independent marginal utility of each unit of commodity
- Utility is not measurable in reality.
- Utility is variable.
- Utility is different from usefulness.
- No legal or moral connotations.
Total Utility (TU)
Total Utility refers to the total satisfaction derived by the consumer from the consumption of a given quantity of a good.
TU = Sum of all utilities.
Marginal Utility (MU)
Marginal Utility refers to the addition made to the total utility by consuming one more unit of a commodity.
MUn = TUn - TUn-1
The utility analysis have developed two laws which have a very important place in economics are
- Law of Diminishing Marginal Utility
- Law of Equi-Marginal Utility