UTILITY

Meaning of utility :-

 Utility is the quality or capacity of a product which enables it to satisfy human needs and wants. It is a power to satisfy want..

Basic Assumptions of Utility Analysis:

  i) Rational consumer: people purchase product rationally

 ii) Fixed time: it deals with fixed time period

 iii) Income and test: of the people is constant 

 iv) Independent: differ from product to product 

 v) MU of money: is constant; rich vs. poor money utility 

 vi) Introspection: differ from one people to another 

 vii) Ordinal utility:- ordinal utility states that satisfaction which a consumer derives from consumption of good or service cannot be expressed numerical units. It is expressed by in ranks 1st phase, 2nd phase .

 viii) Cardinal utility :- cardinal utility is the utility wherein the satisfaction derived by the consumers from the consumption of good or service can be expressed numerically like 1,2,3.

Types of Utility

* Initial Utility- Satisfaction Derived from very first unit consumed of any object. 

* Total Utility - Total Satisfaction derived from the product.

*  Marginal Utility-  It is the addition made to the total utility by consuming one more unit of a commodity."

Relationship between Total utility and Marginal utility