Table of Contents
Micro Economics Notes on Consumer Behaviour Theory
Utility
Ability / power of a good or service to satisfy one or more needs or wants of a consumer is called Utility.
Or
The satisfaction a consumer receive form consuming a product or service is called Utility
Examples of utility
Goods or Service Ability to Satisfy
- Water Thirst
- Bread Hunger
- Pen Writing
- Teacher Knowledge
- Car Travelling
- Doctor Treatment of illness
- Bulbs Light
- Fan Air
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Determinants / Characteristics of Utility
1) Intensity of Want:-
It depend upon human desire. The more intense the desire of a man for a commodity will be, the more utility it will have for him while if he does not desire that commodity, it will have no utility.
For example:-
Water has a lot utility for a thirsty person but not for a person who has no thirst.
2) Time:-
Utility of a commodity may differ in different time. Some of the commodities satisfy us more in , say, youth and less in old age or more in childhood and less in mature age.
For example:-
Toys possess great utility for children as compared to young boys.
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3) Weather:-
Utility of a commodity may differ in different seasons.
For example:-
Woolen clothes, room-heaters, blankets etc have much utility in winter season but they have little utility in summer season. On the contrary, ice, fans etc have greater utility in summer season but they have little utility in winter season.
4) Change in shape:-
With the change in shape, the utility of a good also changes.
For example:-
Timber has utility but when it is changed into furniture, its utility increases many times.
5) Change in place:-
Utility of a commodity changes with the change in its place.
For example:-
Various kinds of herbs grow on hills or mountains and they have no utility there but when they are brought to cities, their utility increases.
6) Knowldedge of uses of goods:-
With the increase in the knowledge of man, methods of better use of commodities are discovered, so their utility increases.
For example:-
In the past man was not aware of the usefulness of natural gas. Owing to scientific progress, he discovered new uses of it. Thus these uses increased its utility.
7) Change in possession:-
A change in ownership also causes a change in utility of a commodity.
For example:-
Book of economics has less utility for a student of science but it has much utility for the student of economics.
8) Subjective Entity:-
Utility of a commodity, that a person derive from its use, is a subjective and psychological concept. It differs from person to person.
For example:-
Cigarette has great utility for smoker but zero for non-smoker.