Definition:Utility is the quality in goods to satisfy human wants, so it can also be said that human wants satisfying capacity of goods or services.Utility is measured in terms of money and it depends upon the intensity of want. In modern time, utility has also been called"expected satisfaction".
ATTRIBUTES OF UTILITY:
1)Principal of diminishing marginal utility: Equal quantities of good consumed by an individual during a specific period yeild ever lesser marginal satisfaction while all other factors remain static.
Example:Consuming 1st slice of pizza may satisfy a person's hunger.If a 2nd slice of pizza is consumed, the satisfaction of eating that 2nd slice will be less than the satisfaction gained from eating the first.If a third is eaten the satisfaction will be even less.
2)Utilty diminishes over time: The utility of a commodity diminishes at the consumer gets larger quantities of it.
Example:Suppose a person starts buying new dresses, he has a positive marginal utility initially. As a person wears his dresses he will be buying more and more and his degree of satisfaction will be reduced because of the accumulation of more new goods.Here utility towards wearing old dresses diminishes over time.
3)Consumer is not an identical: The rate at which marginal utility diminishes depends on individuals taste and preferences and so differs across consumers.
Example: Suppose a person is going to the hotel for the first time , his initial marginal utility has positive .When he goes for the second time for the same hotel, his expectations on the food taste will be high but if that hotel fails to satisfy the customer wants , his preferences gets changed, marginal utility diminshes.
ATTRIBUTES OF UTILITY:
1)Principal of diminishing marginal utility: Equal quantities of good consumed by an individual during a specific period yeild ever lesser marginal satisfaction while all other factors remain static.
Example:Consuming 1st slice of pizza may satisfy a person's hunger.If a 2nd slice of pizza is consumed, the satisfaction of eating that 2nd slice will be less than the satisfaction gained from eating the first.If a third is eaten the satisfaction will be even less.
2)Utilty diminishes over time: The utility of a commodity diminishes at the consumer gets larger quantities of it.
Example:Suppose a person starts buying new dresses, he has a positive marginal utility initially. As a person wears his dresses he will be buying more and more and his degree of satisfaction will be reduced because of the accumulation of more new goods.Here utility towards wearing old dresses diminishes over time.
3)Consumer is not an identical: The rate at which marginal utility diminishes depends on individuals taste and preferences and so differs across consumers.
Example: Suppose a person is going to the hotel for the first time , his initial marginal utility has positive .When he goes for the second time for the same hotel, his expectations on the food taste will be high but if that hotel fails to satisfy the customer wants , his preferences gets changed, marginal utility diminshes.
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