Concept and approach of utility

Concept and approach of utility

Concept and approach of utility

        In the ordinary language utility means ‘usefulness’. In economics, the utility is defined as the power of commodity or service to satisfy a human want. The utility is a subjective or psychological concept. The same commodity or service gives different utilities to different people. For instance for a vegetarian, Mutton has no utility. Warm clothes are little utility for people living in a hot country. So, utility depends on the consumer and his need for the commodity.

There are two basic approaches to the study of consumer demand theory. The first approach is the utility approach. It involves the use of measurable (cardinal) utility to study consumer behavior. Marshal is the chief exponent of the utility approach to the theory of demand. It is known as cardinal utility analysis or marginal utility analysis or utility analysis.

The second approach is the indifference curve approach which uses the idea of comparable utility (cardinal utility). J.R Hicks and R.G.D Allen introduced the indifference curve approach.

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