Utility and its Meaning

Consumer has a pivotal role in the economic activity. He consumes goods and services for the satisfaction of his wants. Satisfaction of wants is the beginning and end of all economic activity. Thus micro economics analysis always begins with the understanding of the consumer’s behaviour by investigating into fundamental basis of demand. Stanley Jevouns a noted classical economist originated the concept of “utility” as the fundamental basis of consumers demand for a commodity.  The term utility refers to the want satisfying power of a commodity or service assumed by a consumer to constitute his demand for that commodity or service. 

Utility thus is an introspective or subjective term. It relates to the consumers mental attitude and experience regarding a given commodity or service. Thus, utility of a commodity may differ from person to person. Utility is a relative term it depends on time and place. Thus, the consumer may experience a higher or lesser utility for the same commodity at different times and different places. Moreover, utility has no ethical or moral consideration. A commodity that satisfies any type of want whether morally good or bad has utility. Further utility is not necessarily equaled with usefulness. 

 A commodity may have utility, a power to satisfy some want but, it may not be useful to the consumer. For example: a Cigarette has utility to a smoker but it is injurious to his health. Utility is the function of intensity of want. A want which is unsatisfied or greatly intense will imply a high utility for the commodity concerned to a person. But a want is satisfied in the process of consumption it tends to become less intense than before. As such the consumer tends to experience a lesser utility of that commodity than before. Such an experience is very common and it is described as the tendency of diminishing utility experienced with the increase in consumption of a commodity. In other words more of a commodity we have, the less we want it.


Notes provided by Prof. Sujatha Devi B (St. Philomina's College)