Meaning of Utility in Economics.

Meaning and Definition of Utility in Economics| Characteristics of Utility.

Meaning of Utility.

Utility is a fundamental concept in economics which is defined as want satisfying power of a commodity. 

It does not necessarily mean that the commodity is useful in the ordinary sense of the word. A commodity will possess "utility even though it may not be useful. 

For example, liquor has utility, so long as it satisfies the want of an addict, although everyone knows that it is harmful. The utility concept was developed first by Marshall. . 

Some of the important definitions are as follows:

(1) "Utility is the capacity of a commodity to satisfy human want" - Wagh 

(2) "Utility is that satisfaction of goods, which is received by a man at the time of its use."

Thus, utility may be defined as the power of a commodity or service to satisfy a human want. It is essentially or subjective or introspective concept. It relates to inner sentiments and emotions. It has no physical or material existence.

Characteristics of Utility

The main characteristics of utility are: 

1. It does not refer to the intrinsic utility- Utility does not refer to the intrinsic utility or the physical characteristics of a commodity. Different persons may like to have the same thing. For example, a cigarette may be wanted by a non-smoker too for business purposes.

2. It is psychological- It is totally a psychological phenomenon as we cannot see or touch it. It could only be imagined and has got deep relationship with inner feelings of men.

3. A relative term- It is a relative concept. Utility is a power of satisfaction and is measured by the extent to which it satisfies human wants. It has no material existence. Consumption of a bread and a cup of coffee shall help to satisfy our appetite, but the degree of satisfaction will only be experienced by the consumer of these commodities, and cannot be demonstrated to the onlookers.

4. It is a subjective concept as it arises due to the necessities of man. For example, a man is very thirsty, he drinks a glass of cold drink, with its consumption its utility to him declines even though the quality of cold drink remains the same

5. It depends upon the intensity of wants- Wants depend on and differ in intensity. The more the intensity, the greater will be the utility. The intensity of person's desire for a particular commodity depends on his taste, habits and various other factors. At different times the intensity of one's desire may be different.

6. It differs from man to man- It is true that utility shall differ between different individuals. For example, Karl Marx's "capital" shall have great utility for a student mastering Marxian socialist economics but a student of elementary economics will pay no attention to it. It is noteworthy here that not only utility of a commodity differs from man to man, but it will also be different for the same Individual placed in different circumstances.

7. No rational significance- The term "utility" has been used in economics without any rational significance. The consumption of a particular commodity may be harmful, immoral or illogical. But, if this commodity satisfies some want of a person, it is deemed to possess utility from the economic point of view.

8. It is only a satisfying power- In economics, "utility is not understood in relation to its quality or moral values. It is simply its want satisfying power. Whether a commodity happens to be useful or not, it possesses utility only when it is capable of satisfying a certain human want