Question

Describe how the term “Utility” is used in economics and give examples. Secondly, describe how the notion of “Marginal” is applied to “Utility”. Again, examples are required.

Answer 1

'Utility' is the want satisfying capacity of an unit of good or services.Its the satisfaction that a consumer gets from consuming a certain unit or combination of goods and services.Its is a very common and popular terminology used frequently in economics.Its a psychic satisfaction or desire fulfillment,happiness or pleasure that we get fromm using any good or services.For example,when we are hungry,we desire/want for food and suppose we get it and consume it,then we are a bit satisfied after consuming the first unit as it calms our hunger and fulfills our desire.This process goes on.Utility is used in economics in cardinal i.e.that can be counted or measured in numbers and in ordinal i.e.that can't be measured in numbers,it can only be compared terms.The relevance of any unit of good or service or resource is measured by its utility.The other definition of utility from economics point of view can be -Its the amount of money that a consumer is willing to pay for a unit of good or service.

The term 'Marginal' means the additional unit or extra unit and we have already defined utility ahead,so Marginal Utility(MU) refers to the additional utility that the consumer derives from consuming an extra unit ,amounts of other goods consumed by him held constant.Its the addition made to the Total utility(TU).Its the addition to the TU when a consumer increases his consumption from n-1 units to n units.For example- By consuming the first cup of tea,we get 12 utils of satisfaction and again after consuming the second cup of tea,the TU becomes 22 utils.It means that the MU here is 10 utils as it is the change in TU from consuming successive unit of commodity.