utility

Economics

(noun)

The ability of a commodity to satisfy needs or wants; the satisfaction experienced by the consumer of that commodity.

Related Terms

  • demand curve
  • ordinal
  • cardinal
  • Trade-offs
  • consumer surplus
  • marginal benefit
  • producer surplus
  • Transitive
Management

(noun)

In economics, utility is a representation of preferences over some set of goods and services. Preferences have a utility representation so long as they are transitive, complete, and continuous.

Related Terms

  • bias
  • decision tree

Examples of utility in the following topics:

  • Principle of Diminishing Marginal Utility

    • This is a simple illustration of diminishing marginal utility .
    • While there are some circumstances where there will always be some marginal utility to producing or consuming more of a good, there are also circumstances where marginal utility can become negative.
    • This concept suggests a uniform steady decline of marginal utility, but that may not always be the case.
    • While utility may increase for a period, there is usually a "tipping point" where afterwards marginal utility decreases.
    • Getting a third ticket for your date will have low marginal utility than the second.
  • Marginal Utility

    • Marginal utility of a good or service is the gain from an increase or loss from a decrease in the consumption of that good or service.
    • A person should produce or purchase an additional item when the marginal utility exceeds the marginal cost .
    • Marginal utility is measured on a per unit basis.
    • When evaluating the marginal utility of any item, it is important to know in what unit utility is measured.
    • The marginal utility of owning a second house is likely less than the marginal utility of owning the first house.
  • Defining Utility

    • The utility of any object or circumstance can be considered.
    • Ordinal utility ranks a series of options in order of preference.
    • An example of a statement reflecting ordinal utility is that "I would rather read than watch television. " Generally, ordinal utility is the preferred method for gauging utility.
    • Cardinal utility also ranks a series of options in order of preference, but it also measures the magnitude of the utility differences.
    • An example of a statement reflecting cardinal utility is "I would enjoy reading three times more than watching television. " Given how difficult it is to precisely measure preference, cardinal utility is rarely used.
  • The Allocation Problem

    • This can be expressed as a mathematical statement, US = f(UA, UB, . . . , UN), where US represents the total utility of society, UA is the utility of individual A (Adam), UB is the utility of individual B (Barbara) and UN is the utility of the Nth individual.
    • "The utility of society is a function (f) of the utilities of the individuals."
    • The utility of society is the sum of the individuals' utilities.
    • +UN "the welfare or utility of society is the sum of the utility obtained by each individual."
    • If the individuals' utility functions are interdependent (my welfare or utility is affected by your utility), the utilities cannot be summed.
  • Economic objectives

    • In a simplistic world, the welfare or utility of the community is the sum of the utilities or each member of that society.
    • Therefore, if each individual maximizes their utility it will maximize the utility of the group.
    • The maximization of each individual's utility is consistent with the maximization of the utility of society.
    • Since it is not possible to measure utility, welfare or happiness, utility is connected to variables that can be measured.
    • The inability to measure utility also leads to the use of price as a proxy.
  • Theory of Utility

    • The theory of utility states that, all else equal, a rational person will always choose the option that has the highest utility.
    • The theory of utility is based on the assumption of that individuals are rational.
    • In economics, an individual is "rational" if that individual maximizes utility in their decisions.
    • Whenever an individual is to choose between a group of options, they are rational if they choose the option that, all else equal, gives the greatest utility.
    • Recalling that utility includes every element of a decision, this assumption is not particularly difficult to accept.
  • Optimization of consumption

    • It means making the most of our limited resources to maximize our utility.
    • One can equivalently refer to each point on the indifference curve as rendering the same level of utility for the consumer.
    • That is, the indifference curve tangent to the budget constraint represents the maximum utility obtained utilizing the entire budget of the consumer.
    • The tangent point represents the amount of goods the consumer should purchase to fully utilize their budget to obtain maximum utility.
    • Instead of comparing two single goods, you can construct the indifference curve so it compares the utility of one good with the utility of a composite of all other goods.
  • Biosynthesis and Energy

    • Biosynthetic building blocks utilized by organisms include amino acids, purines, pyrimidines, lipids, sugars, and enzyme cofactors.
    • The major pathways utilized to ensure fixation of carbon dioxide include: the Calvin cycle, the reductive TCA cycle, and the acetyl-CoA pathway.
    • The Calvin cycle involves utilizing carbon dioxide and water to form organic compounds.
    • An additional biosynthetic pathway utilized by microorganisms includes the synthesis of sugars and polysaccharides.
    • This process utilizes precursors such as pyruvate, lactate, or glycerol .
  • Value and Relative Value

    • They find a greater utility in the object.
    • This increase in utility is called marginal utility, and this is all known as the marginal theory of value.
    • The utility for the seller is not as an object of usage, but as a source of income.
    • And here again it is marginal utility that comes in.
    • Here we also get into the utility for resellers.
  • Chemical Assays, Radioisotopic Methods, and Microelectrodes

    • There are numerous tests and assays available that are utilized to aid in bacterial identification in a variety of settings.
    • These assays are often utilized to aid in bacterial identification.
    • Chemical assays are utilized to identify and determine chemical components within a microorganism.
    • Gram staining is utilized to differentiate bacteria into either of these Gram groups.
    • The O-F test is utilized to determine the way in which a bacteria is capable of metabolizing carbohydrates such as glucose.
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