Utility & its Meaning

Utility of a good is its expected capacity to satisfy a human wants. To a consumer, the utility of a good is the satisfaction which he expects from its consumption. It is extent to which it is expected to satisfy his wants. utility of a good to a consumer can differ from the satisfaction which he actually derives from its consumption.

Utility of a good is the satisfaction which consumer expects from its consumption depends upon mental assessment of the consumer and consumer’s judgment depends upon various factors for example, the intensity of the want to be satisfied.

Utility of a good differ from consumer to consumer. This is because a given want can be felt in different intensities by different consumer. The utility of a good keep changing even for the same consumer on account of changes in the intensity of want to be satisfied by its use. This change may be the result of a shift in the circumstances faced by the consumer, or it may take place in the process of the satisfaction of the want itself.

In economics, we are not concerned with the ‘normative’ aspects of utility. While studying the problem of price determination of a good, we are only concerned with the ‘reason for’ and ‘intensity of’ of its demand by the consumer. It does not matter whether its consumption adds to their well being or not. So long as the consumer expect to derive some ‘satisfaction’ from a good (that is, so long the good has a ‘utility’ for them), they will be ready to buy it at some price and create a demand for it in a market.