What is Utility?
A customer is the one who normally determines his demand for a goods on the basis of satisfaction (utility) that he procures from it. So, what is utility?
Utility of a goods is its want-satisfying capability. The more the stronger the aspiration to have it, the more is the utility procured from the goods. Utility is instinctive. Distinct people can get different degrees of utility from the same goods. For instance, someone who likes sweets will get much higher utility from a sweet than someone who doesn’t sweets. Utility that an individual obtains from the goods can differ with change in location and time. For instance, utility from the use of an Air conditioner certainly relies upon whether the person is in Srinagar or Jaipur(location) or whether it is winter or summer (season).
Approaches that elucidate consumer behaviour
- Cardinal Utility Analysis – Cardinal utility is defined as – ‘the perspective is put forward by the economists, who presume that utility is quantifiable and the consumer can convey his or her contentment in fundamental or measurable numbers, such as 2,3,4 and so on.
Measures of Utility :
- Total Utility – Total utility of a determined quantity of a goods or commodity (TU) is the total contentment procured from utilizing the given amount of some goods ‘p’.
- Marginal Utility – MU is the difference in total utility due to utilization of one extra unit of a goods or commodity.
- Ordinal Utility Analysis – The customer does not quantify utility in numerals. All the theory of customer decision-making under constraints of certitude can be and mostly is, conveyed in the terms of ordinal utility.
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