Dr Alfred Marshall has explained utility analysis of demand in his book   “PRINCIPLES OF ECONOMICS” published in 1890. His study of demand is based on the marginal utility analysis. The demand for a commodity depends on the utility of that commodity to the consumer. A consumer will demand a commodity or a service if it has a capacity to satisfy his want.  The term utility  therefore is “the want satisfying capacity of a commodity.”


1] Utility is the basis of demand – A consumer demands a commodity because   it has a utility ie the capacity to satisfy his want. Therefore utility is the basis of demand as well as law of demand.

2] Utility is relative – (ie it changes from time to time place to place and situation to situation.) eg – umbrellas have utility in the rainy season and woolen in winter. Blood donation has time utility.      eg –oxygen cylinder has more utility at a higher altitude than sea level.

3] Utility is subjective – (ie it changes from person to person)    Utility is a psychological concept. It shows a relation between subject and object ie e think of a commodity in relation to our want.

4] Utility is not visible (abstract) – Utility is the capacity or the ability of a commodity to satisfy human wants. It IS Intangible and has no physical existence. It is felt and  experienced the consume but cannot be seen.

5] Utility is multipurpose – The same commodity can satisfy many wants. Electricity can be used lights A.C fan generators etc. Thus different people will buy the same commodity to satisfy different wants. Utility changes according to use.       Eg electricity ha s a greater utility  for lightening than for ironing. Thus different people will purchase this commodity to satisfy different wants.

6] Utility is free of ethical considerations – ( it is morally  colourless) In economics as long as a commodity can satisfy a want , it has utility irrespective of whether  the want being satisfied is good or bad, right or wrong, desirable or undesirable, moral or immoral etc.       eg knife for cutting vegetables(or for killing) ,a rope for tying luggage ( or for committing suicide), consumption of liquor, opium etc.

7] Utility is different from usefulness – In ordinary language utility and usefulness mean the are synonyms but in economics, utility is the want satisfying capacity of a commodity whereas usefulness necessarily confers a benefit on the consumer. Eg nuclear weapons are harmful however they have utility as they satisfy a want. Nuclear power is used for electricity has both utility and usefulness.

8] Utility is different from pleasure – Utility is the want satisfying commodity of a commodity precedes   consumption whereas pleasure is a feeling of delight experienced by a person after satisfying a want therefore follows consumption. Not all commodities having utility yield pleasure but all commodities which yield pleasure have utility. Eg – An injection satisfies a patients want to get better but he gets no pleasure.

9] Utility is different from satisfaction – Utility the want satisfying capacity of a commodity precedes consumption whereas a feeling of satisfaction is experienced

10] ]Utility depends on the intensity of the want – Utility is the function of the intensity of the want. There is a direct relation between the intensity of the want and utility. Greater the utility greater will be the utility.

11] Utility cannot be cardinally   measured – Since utility is subjective and psychological in nature and can only be experienced , it cannot be precisely measured in numerical terms.

12] Utility diminishes with increases in consumption – As a want is satisfied in the process of consumption it’s intensity diminishes and therefore  the utility derived will also diminishes.

13] Utility increases with knowledge – Due to research and technology the knowledge about new goods and new uses of various goods will be discovered. Therefore as knowledge increases utility increases.       Eg – invention and use of mobile phones

Therefore as Mrs Joan Robinson says, “utility is the quality in a commodity that makes individuals want to buy them, and the fact that individuals want to buy the commodity shows that they have utility.”

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