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Utility

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Many times we tend to buy products or food in supermarkets that satisfy us up to a certain point, but after exceeding that satisfaction they cease to be ” priority ” or “lose satisfaction”. This can be measured by something called utility which we can plot the satisfaction from personal opinion about a product, good or service

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What is the utility?

In simple words, utility in terms of economy refers to that satisfaction that occurs in a user when acquiring a good or product or contracting a specific service. At the same time it allows to measure the impact of a product and how it could be improved to make it more profitable. Usually to explain these issues are used the consumption of food specific as hams ,cakes or chocolates since they can be easily sectioned to explain. The term  was originated in the language Latin ancient through the word ” utilitas ” and translates as utilitarian , referring to interest, profits and fruits obtained from something specific.

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  • Definition
  • Utility Features
  • What is it for
  • Types
  • How it is calculated
  • Importance
  • Useful examples

Definition

According to the Royal Spanish Academy , utility is defined as a satisfactory measure in which any individual can give a correct assessment of a good or service in terms of economy .

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These goods or services have a representation within the microeconomics since they satisfy various needs so they generate a positive impact on both the consumer and the seller.

In terms more technicians , the utility is presented as that interest or benefit obtained in from of the use and enjoyment of a good individual or service, that is why a more useful with respect to the same, increase hence the desire to consume that product.

Utility Features

Among the main features within the utility are:

  • Utility not only has a definition for economics issues , but also for sociology issues such as utilitarianism .
  • Within even deeper economic terms, utility makes it possible to measure indifference curves in relation to product-individual-society.
  • Utility is taught in school but in a different way, such as when pieces can be removed from a cake before it is finished.
  • Many of the images found on Google for the search for the word ” economy ” section of images , are merely representations graphs margin profit .

What is it for

This has a great representation within the microeconomics through the utility function , which shows in an ascending way how the utility is decreasing as a consequence of the continuous increase of consumption by users.

In turn, this has a maximum achievable score and that is when it is no longer consumed and therefore the consumption of it cannot continue to be assessed . This is a tool widely used by entrepreneurs both internally and externally . (Internal to test product quality, among others and external to promote it)

Types

Among the types of utility are:

  • Marginal utility: it refers to the relationship between the satisfaction with decreasing the product in question; In other words, it is the graph that shows how satisfaction decreases as the units increase.
  • Total utility: it is  all the satisfaction that is generated in the user when having consumed or acquired the totality of a good or service .
  • Net profit:  refers to the quantity consumed of the good or service without considering in a direct way how it ended up satisfying the user .

How it is calculated

To calculate the utility, you have to know specifically what is going to be evaluated, in the case that it was a chocolate, the number of sections that it has are placed, for example: 8 bars or sections , the amount is established on one side of bars successively and at the back are placed both the marginal utility and the total utility, which are the main ones .

From this point on, progress is made gradually to determine the satisfaction point with respect to chocolate , until reaching the point 0 which would be the saturation and from this point the supersaturation that is marked in a negative way .

Importance

The utility is a tool used by economists and statisticians to determine satisfaction in customers when such purchase products in turn is usually also used internally to test the utility of the products before removing them to the market.

Useful examples

Supposing that ” X ” person is given a cake divided into 8 portions , the first portion generates 10 uses , the second 15 useful  and adding it with the first would give  25 of total utility and that’s how it goes. Understanding this, it could be graphed as follows:

Cake Portions Marginal utility Total profit
1 10 10
2 15 22
3 12 35
4 9 46
5 4 54
6 0 52
7 -4 50
8 -8 48

The sum to get the total utility would be as follows: for example, for the total utility of the second portion, add 15 + 22 = 37 .

As we can see, the utility increases until it reaches the saturation point , in this case it would be in 5 portions of cakes, from that moment it begins to decline.

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