Utility

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

Assumptions:

• 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

Characteristics:

1. Utility is not measurable in reality.
   
2. Utility is variable.
3. Utility is different from usefulness.
4. 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