“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:
Satisfaction achieved by consuming first unit of good is called initial 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.
A good is supposed to have positive utility when its total utility is increasing and its marginal utility is positive.
The point where marginal utility becomes zero and total utility stop increasing is point of zero utility or the point of satiety.
At this stage total utility of a good starts decreasing and marginal utility comes below to the point zero.
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.
- 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.