Utility is the capacity of a commodity to satisfy human wants. It is defined as a "want satisfying power of a commodity” Acc. To Hibbdon “Utility is the quality of a good to satisfy a want”.
Total Utility (TU): -
Total utility refers to the total satisfaction obtained from the consumption of all possible units of a commodity. It measures the total satisfaction obtained from consumption of all the units of that good. For example, if the 1st ice-cream gives you a satisfaction of 20 utils and 2nd one gives 16 utils, then TU from 2 ice-creams is 20 + 16 = 36 utils. If the 3rd ice-cream generates satisfaction of 10 utils, then TU from 3 ice-creams will be 20+ 16 + 10 = 46 utils.
TU can be calculated as:
TUn = U1 + U2 + U3
+……………………. + Un
Where:TUn = Total utility from n units of a given commodity
U1, U2, U3……. UN = Utility from the 1st, 2nd, 3rd nth unit
n = Number of units consumed
Marginal Utility (MU): -
Marginal utility is the additional utility derived from the consumption of one more unit of the given commodity. It is the utility derived from the last unit of a commodity purchased. As per given example, when 3rd ice-cream is consumed, TU increases from 36 utils to 46 utils. The additional 10 utils from the 3rd ice-cream is the MU.
In the words of Chapman, “Marginal utility is
addition made to total utility by consuming one more unit of a commodity”.
MU can be calculated as: MUn = TUn – TUn-1
Cardinal utility (CU): -
Measurement of utility in terms of money is called Cardinal Utility Approach. The amount of money which a consumer is prepared to pay for a commodity in the indirect measurement of its utility. Cardinal numbers are those which can be added or subtracted. Fisher has used the term ‘Util’ as a measure of utility.
Cardinal utility (CU): -
Measurement of utility in terms of money is called Cardinal Utility Approach. The amount of money which a consumer is prepared to pay for a commodity in the indirect measurement of its utility. Cardinal numbers are those which can be added or subtracted. Fisher has used the term ‘Util’ as a measure of utility.
0 Comments:
Subscribe to:
Post Comments (Atom)