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Presentation On Utility

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Published in: Economics
8,801 Views

Utility its kind with mathematical approach.

Shikha B / Patna

3 years of teaching experience

Qualification: B.A (Patna Women's College, Patna University - 2018), M.A (Nalanda Open University - 2021)

Teaches: Economics

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  1. UTILITY AND ITS KINDS
  2. DEFINITION "Satisfaction received by consumption of any goods or services." It is expressed as a quantity measured in hypothetical units which are called 'utils' . As for example : when we are thirsty and drink a glass of water that particular glass of water provides us much satisfaction which in called utility in terms of Economics.
  3. THOUGHTS ABOUT UTILITY > According to 'Alfred Marshall' , "the utility of a quantity of a good is the amount of money that a consumer is willing to pay for it instead of defining in terms of subjective units of 'utils' . > According to 'J.R.Hicks' , the comncept of ordinal utility is just according to which a person could give only ranking or order to the utilities he derived from various goods or cobination of goods.
  4. CHARACTERISTICS • It depends upon intensity of want • It is subjective • It is relative • It is pyschological • It is different from pleasure • It is devoid of social, legal or ethical implications.
  5. KINDS OF UTILITY MARGINAL UTILITY: It is the utility derived from an additional unit of consumption. TOTAL UTILITY: It is the sum of all the utilities derived from the total number of units consumed. AVERAGE UTILITY: It is that utility in which the total utility derived is divided by the totaln number of units consumed.
  6. TABULAR REPRESENTATION No. Of Units Marginal Utility (in utils) 40 30 20 10 -10 -20 -30 Total Utility (in utils) 40 70 90 100 100 90 70 40 Average Utility (in utils) 40 35 30 25 20 15 10
  7. POINTS TO REMEMBER M.U.nth= T.U(n)- T.U.(n-1) •T.U.= M.U.1+M.U.2+ +M.U.n •A.U.= T.U./n •T.U. Increaes till Mol-J. is+ve •T.U. Is maximum when Mol-J. is O(zero) •T.U. decreases when Mol-J. is —ve •A.U. decreases continuosly at the same rate
  8. LAW OF DIMINISHING MARGINAL The 'Law of Diminishing Marginal Utility' , also called 'Law of Satity' is an important law of consumption. It was first described by an Austrian economist 'H.H.Gossen', and is named after him, 'Gossen's First Law'. According to 'Marshall', "The additional benefit which a person receives from a given stock of a things diminishes with every increase in the stock that he already has."
  9. NECESSARY CONDITIONS FOR ITS APPLICABILITY • Consumption of goods should be continuous. • Size of consumption units should be equal. • All units of consumption should be homogeneous. • Prices of goods should be the same. • Income level of the consumer must be same. • There should be no change in fashion, nature and taste of the consumer. • Goods should be of an ordinary type. • Only one necessity of a want of a consumer can be studied at a particular time.
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