Econmic Utility
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The document discusses the concept of utility in economics. It defines utility as the satisfaction obtained from consuming goods and services. There are four types of utility created: form utility by changing the form of goods, place utility through transportation, time utility by storing goods over time, and service utility from personal services. The document also explains marginal utility, total utility, and average utility, providing examples to illustrate positive, zero, and negative marginal utility. Total utility is the sum of marginal utilities, while average utility is total utility divided by the number of units consumed.
Econmic Utility
- 1. Abhishek Giri (B.sc., M.F.Sc.) Lecturer in the Department of Aquaculture Management Prabhat Kumar College, Contai
- 2. It is a measure of satisfaction an individual gets from the consumption of the commodities. In other words it is a measurement of usefulness that a consumer obtains from any goods. A utility is a measure of how much one enjoys a movie, favorite food or other goods.
- 3. Form Utility- is created by changing the form or shape of the materials.(wood furniture to steel furniture) Place Utility- is created by transporting goods from one place to another. (Goods from factory to market place) Time Utility- storing, hoarding and preserving certain goods over a period of time may lead to the creation of time utility. (storing food grains and releasing at the time of scarcity) Service utility- is created in rendering personal services to the customer by various professionals – lawyers, doctors, teachers etc.
- 4. Marginal Utility Positive Marginal Utility Zero Marginal Utility Negative Marginal Utility Total Utility Average Utility
- 5. Number of Bread Marginal Utility Kinds Of Marginal utility 1 20 +ve Utility 2 16 +ve Utility 3 12 +ve Utility 4 8 +ve Utility 5 4 +ve Utility 6 0 Zero Utility 7 -4 -ve Utility The extra satisfaction is an economic term called marginal utility.
- 6. Positive MU- Sale in a store which gives a discount offer to a consumer that purchase of two jeans will offer the third jeans free of cost. It will increase the MU of a consumer as third jeans cost zero to the consumer. Zero MU- if you have several coupons for the same item but only plan to purchase one of that item, there is zero MU in having those extra coupons. Negative MU- using more shampoo than necessary dose not make a person’s hair cleaner, the excess shampoo is simply washed away and wasted.
- 7. “Total Utility is the sum of the marginal utilities associated with the consumption of the successive units.” – Mayer Number of Bread Marginal Utility Total Utility 1 20 20 2 16 20+16=36 3 12 36+12=48 4 8 48+8=56 5 4 56+4=60 Total=60
- 8. Average Utility is that utility in which the total unit of consumption of goods is divided by number ofTotal Units. Unit of Breads Marginal Utility Total Utility Average Utility 1 16 16 16 2 12 16+12=28 28/2=14 3 8 28+8=36 36/3=12 4 4 36+4=40 40/4=10 5 0 40+0=40 40/5=8 6 -4 40-4=36 36/6=6 7 -8 36-8=28 28/7=4