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Utility: Meaning and Characteristics of Utility

Utility:

An early introduction of the utility notion into social sciences was accomplished by the English Philosopher Jeremy Bentham (1748-1831) After studying legal theory to draw some social legislation. He proposed that society should be organized on the “Principle of Utility” which he defined as “Property in any object to produce pleasure, good, or happiness or to prevent pain, evil or unhappiness”. All legislations according to Bentham should be designed on utilitarian principles to promote “The greatest happiness of the greatest number”.

The next step in the development of utility theory came when the Neo-classical economists such as William Stanley, Jevons (1835 1882) extended Bentham’s utility concept to explain consumer behaviour. Jevons thought economic theory was a “calculus of pleasure and pains” and he showed that rational people would base their consumption decisions on the extra or marginal utility of each good.

So, utility in Economics is taken as “quality of a good to satisfy certain human want”. Everything or object in this world has its utility to satisfy human wants in various ways. For example, water has the utility to Quench thirst, Bus has utility for transportation etc. a utility is a relative term A good may have greater utility for one person but a little or no utility for the other. For example, pen has a greater utility for a student than for an illiterate person. So utility is relative with respect to time, space, use, demand, etc.

According to Prof. Alfred Marshall has defined,

“The utility of a thing to a person at a time is measured by the extent to which it satisfies his wants”.

According to Prof. S.E. Thomas,

“So long as an article satisfies man’s some desire of body or mind, it possesses utility in the economic sense, although this may be pernicious in its effect on the consumers or on others or detrimental to the commodity generally”.

According to Prof. Waugh:

“Utility is the power of commodity to satisfy human wants.”

According to Fraser:

“On the whole in recent years the wider definition is preferred and utility is identified, with desireness rather than with satisfyingness.”

Characteristics of Utility:

Following are the characteristics of utility:

It Depends on Knowledge:

Utility of a commodity may differ for different persons because of this knowledge. The person, who knows about the use of a commodity and enjoy more as compared to that person, who has zero awareness about that commodity.

The utility of many things has increased by the advancement of knowledge. For example, solar energy existed centuries ago but it gave a little utility. Now with the advancement of science and technology its utility has increased many times.

Utility Depends on Ownership:

The commodity lying in a shop has a utility in it. It will not give you any utility unless you buy it. Hence, utility can be obtained only by ownership.

Utility of a commodity may differ when its ownership is considered. The owner of a commodity gets more utility from its use while the person who is not its owner will not enjoy utility.

Utility and Usefulness:

Utility of a commodity may differ from its usefulness. A commodity may not useful but for its user it may have satisfaction.

Utility is the Basis for Demand:

Demand for a commodity is based on its utility. If a commodity provides great utility the consumer will make its demand.

Utility is Immeasurable:

Utility is not measurable in the numerical numbers like 1, 2, 3, …, n. because it is subjective entity and resides in the mind of person so we cannot add it.

Utility Depends on Human Wants:

If a person consumes a product, he finds utility in it and if he does not use it, he does not find utility in it. For example, there is no utility in Wine for a Muslim whereas a non-Muslim will find utility in it because it satisfies his want. Moreover, a product gives more utility in case we need it urgently and vice versa.

It Depends on Use:

If we make an appropriate use of a product it will yield high amount of utility. Conversely, if we misuse it, its utility will fall. For example, the utility of. chair will be high if we use it as a chair. But if we use it as fuel its utility will fall.

It Depends on Number:

The utility of some products will increase by an increase in the number of that product with the people. For example, the utility of a telephone III increase in case the number of telephone connections in the city increase.

Intensity of Demand:

Demand is important in determining the utility of a good or service. If the demand for a certain good is very intense, its utility will be high. For example, if a person is seriously ill, he is in a dire need of certain medicine, that medicine will carry a high utility for that person. But when he recovers the utility for that medicine will fall. Hence utility of a good or service is determined by the intensity of its demand.

Change in Technical Knowledge:

Change of technology due to scientific innovations and inventions also affect the utility of a good. For example a new technology may help a person to make the best use of a good when he knows all the features of a good.

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