In Economics, utility is defined as the capacity of a commodity or service to satisfy human wants. In simple words, it can also be called the want-satisfying capacity of a commodity or service.
Forms of utility
- Form utility: This is created by changing the shape of goods. It acquires value when the shape of a commodity is changed as desired.
- Place utility: This is created by transferring goods from one place to another place where it is more valuable.
- Time utility: This is created when the goods are stored in a particular period of time when their value is low. These goods are stored with the expectation that their value will increase in the future.
- Service utility: This is created by performing services. They are useful to society and people want such services
Marginal utility
Marginal Utility refers to additional utility on account of the consumption of an additional unit of a commodity.
Total utility
This is the total of the satisfaction received by the consumer after consuming all the units of a particular commodity.
Value and Price
Value is the utility of a commodity. However, in Economics, it is explained in two senses—value-in-use and value-in-exchange. Value-in-use means the satisfaction obtained from a commodity.
Value-in-exchange means the amount of goods and services which can be obtained from the market in exchange of a particular thing.
Wealth
The term wealth means money, properties and gold. In Economics, wealth is used to describe all things which have value and possess utility, scarcity and transferability.
Characteristics of wealth
Wealth possesses utility. It is scarce. Supply is less than its demand. It is transferable which means the change of ownership. Externality is another quality of wealth.
Kinds of wealth
- Personal wealth: It is possessed by individuals such as land and building.
- National wealth: It includes wealth of all individuals of the community and public property such as roads and parks.
- International wealth: Wealth which belongs to all nations is called international wealth such as IMF and UNO.
Micro and Macro Economics
- The term ‘micro’ was derived from the Greek word ‘mikros’ which means ‘small’. Microeconomics studies the economic relationships or economic problems of an individual firm, household or consumer. It is concerned with the determination of output and price for an individual firm or industry.
- The term ‘macro’ is derived from the Greek word ‘macro’ which means large. Macroeconomics studies economic relationships or economic problems of the economy as a whole. It is concerned with the determination of the aggregate output and general price level in the economy as a whole
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