Utility:

“Utility means satisfaction which a person obtains by use of specific good. All the goods have some sort of quality which can be utilized. As a common example water has an ability to quench thirst or a car has an ability of transportation etc. utility of any good might be different in value for two people. For example: a book has more utility for a literate person as compared to an illiterate person.

Aspects/Forms of utility:

Following are the some aspects of utility:

Initial utility:

Satisfaction achieved by consuming first unit of good is called initial utility.

Marginal utility:

A change in total amount of utility by consuming an additional unit of a good is called marginal utility. There are two laws of marginal utility.

  • Law of Diminishing marginal utility.
  • Law of Equi-marginal utility.

Positive utility:

A good is supposed to have positive utility when its total utility is increasing and its marginal utility is positive.

Zero utility:

The point where marginal utility becomes zero and total utility stop increasing is point of zero utility or the point of satiety.

Negative utility:

At this stage total utility of a good starts decreasing and marginal utility comes below to the point zero.

Total utility:

It is the sum of all of the units consumed of a certain good.

Relationship between Total Utility and Marginal Utility:

Relationship between the two can be summarized in following three points.zero-utility-table

  • During the process of consuming goods continuously; total utility rises as long as marginal utility is positive i.e > 0.
  • At the point where marginal utility is = 0; total utility is maximum.
  • When marginal utility becomes negative i.e < 0; total utility starts falling.

Ad

Share this

Ad

Ad

About Us

Guidanceportal is a place to learn “the Knowledge” not mere information. Our vision is to spread knowledge of different fields of study and provide guidance in the most simplest and self explanatory way. Our team consists of skillful personnel working in different fields of life who share their practical experience and knowledge.

We understand the importance of continuous refinement & improvement thus your participation in the form of comments will be highly appreciated.

Guidanceportal Team