Utility
Also called: Satisfaction, Usefulness · Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Class 6, Ch 14 "Economic Activities Around Us"; Class 7, Ch 7 "Physical Infrastructure"; Class 9, Ch 9 "The Price Puzzle: What Drives the Market"; Class 12, Ch 2 "Theory of Consumer Behaviour"
Meaning
Utility is the power of a good to satisfy a want. The stronger the need or desire for a good, the higher its utility. Utility is subjective: it differs from person to person, from place to place, and from time to time. Economists use utility to explain why consumers choose some bundles over others.
Example
A room heater gives more utility in Ladakh than in Chennai, and more in winter than in summer. A chocolate lover gets more utility from a chocolate bar than someone who does not care for chocolate.
Don't confuse with
- Usefulness in a moral or health sense: a good can have utility even if it is harmful, such as cigarettes for a smoker. Utility only means that it satisfies a want.
- Price: water has huge utility but a low price. Price follows marginal utility and scarcity, not total utility.