Want satisfying power of a good is called Utility.
Definition:
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According to Jevons, “Utility refers to abstract quality whereby an object serves our purposes.”
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According to Hibdon, “Utility is the quality of a good to satisfy a want.”
Features:
1) Utility is subjective: Because it deals with the
mental satisfaction of a man.
Varies man to man.
2) Utility of relative: It varies with time, place.
3) Utility is not essentially useful: Liquor and
cigarette are not useful, but for
an addict they have utility for him.
4) Utility is independent of morality
Concepts of Utility:
1) Initial Utility: The utility derived from the first
unit of a commodity is called
initial utility. Always Positive.
2) Total Utility: The aggregate of utilities obtained
from the consumption of
different units of a commodity is called Total
Utility.
According to Leftwitch, “Total utility refers to the
entire amount of
satisfaction obtained from consuming various
quantities of a commodity.”
3) Marginal Utility: (Additional Utility) The change
that taken place in the
total utility by the consumption of an additional unit
of a commodity is called
Marginal Utility.
MUnth = Tn - Tn-1
Where,
MUnth = Marginal Utility of nth Unit.
Tn = Total Utility of ‘n’ Units.
Tn-1 = Total Utility of ‘n-1’ Units.
Marginal Utility can be positive, zero & negative
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