Definition: The “Utility” in Economics means the satisfaction derived or expected to be derived from the consumption of goods and services.
The concept of “utility” in economics can be understood in two broad perspectives: from the product’s perspective and the consumer’s perspective. From the product’s perspective, it can be defined as the want-satisfying property of the commodity. From the consumer’s perspective, it means a psychological feeling of pleasure, satisfaction, well-being, happiness which consumer expects to derive from the possession, consumption and the use of the commodity.
There is a fine difference between these two concepts of utility. The want-satisfying property of the commodity is absolute since the utility is very much embedded in the product, irrespective of one needs it or not. For example, Stethoscope has its own utility irrespective of one is a doctor or not. On the other hand, the utility from the consumer’s point of view is the post-consumption phenomena as one can derive satisfaction from the commodity only when he uses it. Thus, the utility in this sense is a subjective or relative concept. The utility is said to be subjective because of the following reasons:
- The commodity may not be useful for all, such as books will have no utility for the illiterates.
- The utility varies from person to person and from time to time.
- The consumer may not derive the same utility from the consumption of the same commodity at different points of time, at different buying levels and for different moods.
Thus, we can say that utility is the satisfaction that the consumer seeks to obtain from the consumption of goods and services, and while for a product, it is the ability to satisfy the wants of the consumers.