Question

How is utility created?

Answer 1

There are four types of utility.

i. Form Utility: Form utility is that which is created by changing the form of goods through the production process.

Value is added when the shape of a commodity is changed as desired. 

For example, a potter creates utility when he makes a pot out of clay for the consumer.

Similarly, form utility is created when a tailor stitches clothes for consumers.

ii. Place Utility: Place utility is that utility which is created by transferring goods from one place to another where these become more valuable.

For example, transportation of marble from Rajasthan to the construction sites in Delhi.

iii. Time Utility: Time utility means making of a good or service at the time when people actually need it.

It is created by storing up goods in a particular period of time when their value is low.

These goods are stored up for future use when their value would increase.

Example: Demand for cold drinks often increase during the summer season.

Hence, companies like Coca-Cola and Pepsi increase their production and advertising during this peak period.

iv. Service Utility: Utility may also be created by performing services.

The services of a doctor, a teacher, a lawyer, a trader or a middleman are obviously useful to society. People want these services.

v. Knowledge Utility: When a person/consumer acquires knowledge about a particular product it is called knowledge utility.

Example: Utility of a mobile phone or a computer increases when a person comes to know about its various functions.

vi. Possession Utility: Possession utility is created when the Possession or ownership of a product is transferred from one person to another.

Example: When car dealer sells car to a person/customer then utility of car increases.