Utility

Utility

It is defined as the power of a commodity or service to satisfy a human want It is a subject phenomenon varies from person to person. The utility depends on the mental made up of the consumer. It does not carry moral or legal significance. For example liquor is harmful for health yet it has utility for an alcoholic. Thus utility has no physical existence, the same commodity may have different degrees of utility for different persons, it cannot be equated with usefulness, and it carries no moral or legal significance.

Cardinal and Ordinal Utility

According to the concept of cardinal, utility can be measured and compared in terms of number of units. According to the concept of ordinal utility the utilities derived from the consumption of commodities cannot be measured and compared. It can simply state apple is more preferable to a mango or a mango is less preferable to a particular person. The theory of consumer’s behavior can be explained without the idea of measurable utility. The units of measurement are imaginary.

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