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Concept of utility

Concept of utility

Jevon (1835-1882) was the first economist who introduces the concept of utility in economics. According to him:

“Utility is the basis on which the demand of an individual for a commodity depended upon”.

Utility is defined as: The power of a commodity or service to satisfy human want”.

Utility is thus the satisfaction which is commodity by the consumer by consuming the goods.

For example, cloth has a utility for us because we can wear it. Pen has a utility who can write with it. The utility is subjective in nature. It differs from person to person. The utility of a bottle of wine is zero for a person who is Non- drinker while it has a very high utility for a drinker.

Hero it may be noted that the term `utility’ may not be confused with pleasure or usefulness which a commodity gives to an individual. Utility is a subjective satisfaction which consumer gets from consuming any good or service.

For example, poison is injurious to health but it gives subjective satisfaction to a person who wishes to die. We can say that utility is value neutral.

There are two main approaches to the of consumer behavior of demand. The first approach is the Marginal Utility or Cardinal Approach. The second one is the Ordinal approach.