Tamil Nadu Model Schools
Chapter: 1
Topic: Introductions to Microeconomics
Subtopic: Utility
Hello students!
Today, let’s learn about Utility.
Utility can be defined as the capacity of goods and services to satisfy a consumer's wants and
needs.
For example, by 11 o'clock in school, your stomach starts making sounds, signaling that
you’re hungry and eagerly waiting for the break. Once the break starts, you rush to have your
lunch. When you eat your favorite food prepared by your mom, you feel satisfied. That
satisfaction is what we call Utility.
Now, let’s understand some important characteristics of utility.
Characteristics of utility.
1. Utility is Psychological
Utility depends on the consumer’s mind. For example, someone who is a vegetarian will not
derive utility from eating non-vegetarian food. A vegetarian person won’t feel satisfied or
happy while eating non-veg food.
2. Utility is Not Equivalent to Usefulness
Utility doesn’t always mean something is useful. For example, a person who smokes derives
utility from smoking because it satisfies their want. But smoking is not healthy or useful for
them. So, utility is not always equal to usefulness.
3. Utility is Not the Same as Pleasure
When you’re sick and take medicine, it provides utility because it helps you recover from
your sickness. But taking medicine does not give you pleasure but it’s not enjoyable or
pleasant when you’re unwell.
4. Utility is Personal and Relative
The utility we get from something depends on the situation and person. For example, eating
food when you’re very hungry gives more utility compared to eating food when you’re not
hungry at all. The same good can provide different levels of utility in different situations or to
different people.
5. Utility Depends on the Intensity of Human Wants (Diminishing Utility)
After playing during PT period, you feel very thirsty and drink five or six glasses of water.
The first glass gives you a lot of satisfaction, but with each additional glass, your thirst
reduces, and by the end, you can’t drink anymore. This is called Diminishing Utility. It
means that as we consume more of something, the satisfaction we get from it decreases over
time.
6. Utility is Subjective and Cannot Be Measured Numerically
Utility cannot be measured like height or weight it’s subjective. You can’t say eating
chocolate gives you "7 happiness points" or buying a dress gives you "10 satisfaction points."
It’s all based on feelings and cannot be measured objectively or numerically.
7. Utility Has No Ethical or Moral Significance
Utility doesn’t depend on whether something is good or bad morally. For example A cook
derives utility from using a knife to cut vegetables for cooking.A criminal might derive utility
from using the same knife for harmful purposes. Utility depends on how something satisfies a
want, not whether it’s ethical or moral.
Let's move to the topic types of Utility
Types of Utility
1.Form Utility: Individuals derive utility when a commodity or service is available in a
specific form that satisfies their needs. For example, chocolate provides utility to you
students because consuming it brings satisfaction make you all happy. However, the raw
material used to make chocolate, such as cocoa, does not provide utility to consumers like
students, as it does not fulfill their wants or needs in its raw form.
2.Time Utility: Utility is derived from commodities or services at the specific time they are
needed. For instance, someone who needs blood due to illness gains utility during their
operation, not at the time of donation.
3.Place Utility:
Consumers derive this when goods/services are conveniently located. When buying groceries,
vegetables, or kitchenware, people prefer nearby stores that offer easy access to all essentials.
4..Service Utility: Individuals obtain service utility when they receive a service at the
moment they need it most. For example, a sick person derives service utility when treated by
a professional doctor during their illness.
5. Possession Utility: it is know as the utility derived when you possess or own commodities
or services like when you own a book you brought from anystore, you are having the
ownership.
6.Knowledge Utility: Knowledge utility is know as the utility we derived when we have
knowledge about particular product. And advertisement provide as a information about he
product and services.
So far we learned that utility is subjective and can be measured, But some Economist are of
the opinion that utility can be measured in cardinal numbers like 1,2,3,...etc.
According to Alfred Marshall, money is the measuring rod of utility. Which means the price
a person is willing to pay for a commodity or service reflects the amount of utility they get it
from them. The more satisfaction a person except , more they are willing to pay for the
commodity or services.
For example, if you like a chocolate that costs ₹150, and you are ready to pay ₹150 for it,
then that chocolate gives you happiness and satisfaction. You get 150 utils of utility from it.
Utils is the unit used to measure utility.
Conclusion:
In this chapter, we explored the concept of utility, which means the satisfaction or usefulness
we get from a product or service.
We learned that:
★ Utility is subjective, meaning it differs from person to person.
★ It depends on time, place, form, possession, service, and knowledge, which are known
as the types of utility.
★ While utility cannot usually be measured exactly, economists like Alfred Marshall
believed that utility can be measured in cardinal numbers using money as a measuring
rod.
Thank you.
