TYPES OF UTILITIES.pptxdkjkjdkfjkdjfkjdkfjk

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1. UTILITY AND ITS KINDS

2. “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. DEFINITION

3. 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 ’ . THOUGHTS ABOUT UTILITY

4. 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. CHARACTERISTICS

5. 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. KINDS OF UTILITY

6. TABULAR REPRESENTATION No. Of Units Marginal Utility (in utils ) Total Utility (in utils ) Average Utility (in utils ) 1 40 40 40 2 30 70 35 3 20 90 30 4 10 100 25 5 100 20 6 -10 90 15 7 -20 70 10 8 -30 40 5

7. 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 M.U. is+ve T.U. Is maximum when M.U. is 0(zero) T.U . decreases when M.U. is – ve A.U. decreases continuosly at the same rate POINTS TO REMEMBER

8. 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.” LAW OF DIMINISHING MARGINAL UTILITY

9. The Equi -marginal Principle, also known as the Law of Equi Marginal Utility or Gossen’s Second Law, implies that a consumer will distribute his/her income on various commodities in a manner that marginal utility derived from the last unit of money spent on each good is equal. EQUI MARGINAL PRINCIPLE

10.  the Equi -marginal principle, you can ensure the maximum utilization of available resources, contributing both to effectiveness and efficiency. The mathematical expression of Equi -marginal Principle: ��� The formula for the equi -marginal principle is  MU_x / P_x = MU_y / P_y , where: MU_x : Marginal utility from good X MU_y : Marginal utility from good Y P_x : Price of good X P_y : Price of good Y

11. Consider this: you have 10 pounds and you want to spend it on apples (costing 2 pounds each) and bananas (costing 1 pound each). Initially, you might derive more utility from consuming apples, but as you continue to eat more, the satisfaction derived from each additional apple decreases according to the law of diminishing marginal utility. Thus at some point, the marginal utility per pound spent on bananas might exceed that for apples. Therefore, to maximize total utility, you should distribute your expenditure such that marginal utility per pound is the same for both apples and bananas. EXAMPLE

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