What is "Utility"?

UTILITY.
The power or characteristic or feature of a commodity to satisfy human wants is called utility.

Thus, utility is termed as value in use. For example:- cloth, has a utility for us because we can wear it. Pen has utility because we can write with it and like candy has a utility for a baby in order to fulfill his/her wants/taste etc.

HUMAN WANTS.
The basic human needs with specific objectives are called wants.

TYPES OF WANTS.

Wants are classifies into two types
i) Economic wants.
ii) Non economic wants.

• ECONOMIC WANTS:
  Those wants which are satisfied by spending money are called economic wants i.e. food, clothing, housing etc.

• NON ECONOMICS WANTS:
  Those wants which are satisfied without spending money are called non economic wants i.e. sunlight, moonlight, rain, air etc.

GRADES OF HUMAN WANTS.
Wants are graded into three categories
i) Necessities
ii) Comforts
 iii) Luxuries

• NECESSITIES:The basic wants which are essential for the survival of a person is called necessities i.e. food, clothing, housing etc.

• COMFORTS:The facilities which give satisfaction to a person, but without which survival is possible is called comforts i.e. motor cycle, television, refrigerators etc.
• LUXURIES:Those wants or extra ordinary facilities, which makes our luxuries, are called luxuries i.e. costly cars, personal planes, jewellery etc.

 FEATURES OF UTILITY.
The main features of utility are discussed below:

• UTILITY DEPENDS ON THE DESIRE.
  i.e. food has a utility for a hungry person, water has utility for a thirsty person.
• UTILITY DEPENDS UPON USE.i.e. football has a utility for a footballer, bat has a utility for a cricketer.
• UTILITY DEPENDS UPON SHAPE.i.e. different balls are used in cricket, hockey, football, table tennis, lawn tennis etc.
• UTILITY DEPENDS UPON KNOWLEDGE.i.e. books have utility for an educated person.
• UTILITY DEPENDS UPON TIME.i.e. woolen clothes have utility in winter season and cotton clothes have utility in summer season.
• UTILITY DEPENDS UPON PERSON.i.e. spectacles for a person whose eyes sight is weak.
• UTILITY DEPENDS UPON PLACE.i.e. warm food in cold countries and cold food in hot countries.
• UTILITY DEPENDS UPON SITUATION.i.e. medicine has utility at the time of sickness or illness.
• UTILITY DEPENDS UPON OWNERSHIP.i.e. the person who has a driving license has more utility of a vehicle as compared to the person who is without vehicle.

UTILITY AND USEFULLNESS.
The utility means the feature of a product to provide satisfaction to the consumers whether the effects are useful or harmful i.e. whether the effects of product is good or bad on the consumer it comes under utility.

GRADES OF UTILITY.
The utility of a product may be:
i) Positive
ii) Negative
iii) Zero
The utility remains positive until the want is not completely satisfied. It comes zero at the point where the want is fully satisfied and it becomes zero after the satisfaction of human want.

MEASUREMENT OF UTILITY.
There are two approaches regarding the measurement of utility.
i) Cardinal approach
ii) Ordinal approach

• CARDINAL APPROACH.This approach is presented by Alfred Marshall, according to him utility can be measured in units. i.e. numbers like 1, 2, 3, and 4 can be given to utility regarding its measurement.
• ORDINAL APPROACH.This approach is presented by John Hicks, according to him utility is just a feeling i.e. satisfaction and we can not give numbers to the utility because the satisfaction is an immeasurable concept. He said that the utility should be replaced with the scale of preferences in the choice of commodities.

TYPES OF UTILITY.
The utilities are classified into
i) Total utility
ii) Marginal utility
iii) Average utility

• TOTAL UTILITY. The sum of utilities provided by the total units consumed during a particular period of time is called total utility.

SCHEDULE.
UNITS OF COMMODITY TOTAL UTILITY
               1                                          10
               2                                          18
               3                                          24
               4                                          28
               5                                          30

EXPLANATION.
The consumer has used 5 units of commodity and he got total utility of 30 units.

DIAGRAM.

The units of commodity are measured along OX and utility on OY. TU is a total utility curve showing the positive relation between units of commodities and their total utilities

• MARGINAL UTILITY. The marginal utility is the change in utility as a result of the change in unit of a commodity i.e. the extra utility given by an additional unit of a commodity is called marginal utility.
  Marginal utility = Change in utility/Change in units of commodity

• AVERAGE UTILITY. The average utility is the result of total utility divided by total units consumed.
  Average utility = Total utility / Total units of commodity

SCHEDULE.
Units of Commodity      Total Utility      Marginal Utility      Average Utility
          1                              10                    10 – 0 = 10             10 / 1 = 10
          2                              18                    18 – 10 = 8             18 / 2 = 9
          3                              24                    24 – 18 = 6             24 / 3 = 8
          4                              28                    28 – 24 = 4             28 / 4 = 7
          5                              30                    30 – 28 = 2             30 / 5 = 6

EXPLANATION.
The consumer used 5 units of a commodity, the total utility is     increasing but the marginal and average utility is declining. The decline in average utility is more than marginal utility.

DIAGRAM.

The units of commodity are measured along OX and marginal and average utility on OY. AU is the average utility curve and MU is the marginal utility curve. Both have negative slope showing inverse relation between units of commodity and marginal and average utility.

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