Definitions [2]
Definition: Utility
- “Utility is the ability of a good to satisfy a want.” (Prof. Hibdon)
- “Utility may be the quality which makes a thing desirable.” (J.S. Nicholson)
Definition: Indifference Curve Analysis
According to Hicks, "It is the locus of the points representing parts of quantities between which the individual is indifferent and so it is termed as an indifference curve."
According to Meyres, "An indifference curve may be defined as a schedule of various combinations of goods which will be equally satisfactory to the consumer concerned."
According to Ferguson, "An indifference curve is a combination of goods, each of which yields the same level of total utility for which the consumer is indifferent." According to Leftwich, "A single indifference curve shows the different combinations of X and Y that yield equal satisfaction to the consumer."
Key Points
Key Points: Utility
- Utility means want-satisfying power.
- It is subjective, varies with time/place, and forms the base of demand.
- Utility differs from usefulness, pleasure, and satisfaction—each has a unique meaning in economics.
- Common types include form, place, time, service, knowledge, and possession utility.
Important Questions [3]
- A Consumer Consumes Only Two Goods X and Y and is in Equilibrium. Show that When the Price of Good X Rises, the Consumer Buys Less of Good X. Use Utility Analysis.
- A Consumer Consumes Only Two Goods X and Y and is in Equilibrium. Show that When the Price of Good X Falls, Demand for Good X Rises. Use Utility Analysis.
- If Marginal Propensity to Save (MPS) is 0.25 and the initial change in investment is ₹ 250 crores, then the final change in income would be ______.
