Question

What do you mean by "Utility"?

Hint:

Think of utility as the "satisfaction score" you mentally give to a product when you use it.

Answer 1

Step 1: Understanding the Concept:
The question asks for the definition of utility, a fundamental concept in the theory of consumer behavior.

Step 2: Detailed Explanation:
In economics, Utility refers to the want-satisfying power of a commodity or a service. It is the amount of satisfaction, pleasure, or benefit that a consumer derives from the consumption of a good.
Key characteristics of utility are: \begin{itemize}[noitemsep] \item It is subjective: Utility varies from person to person, place to place, and time to time. A cup of coffee may provide high utility to one person but none to another. \item It is not the same as usefulness: A commodity may have utility but may not be useful. For example, cigarettes have utility for a smoker but are harmful to health. \item It is ethically neutral: The concept of utility does not involve any moral or ethical judgments. \end{itemize} Economists use this concept to explain how consumers make choices to maximize their satisfaction.

Step 3: Final Answer:
Utility is the capacity of a good or service to satisfy a human want. It is the measure of satisfaction a consumer receives from consuming a product.