3. 3/21/2012
Utility.. In its essence Marginal Utility… Meaning
latot eht ot gnirrefer mret cimonoce nA
ro doog a gnimusnoc morf deviecer noitcafsitas The additional satisfaction a consumer gains from
ecivres
consuming one more unit of a good or service.
RO
.noitcafsitas evitaler fo erusaem A
Term was given by Daniel Bernoulli.
A consumer's utility is hard to measure.
Although affected by:
consumption of various goods and services,
possession of wealth and
spending of leisure time.
12:18:18 12:18:18
Measurement of Utility Quantifying utility
Utility is taken to be correlative to Desire or Want. It has been already
Different ways of measuring UTILITY: argued that desires cannot be measured directly, but only indirectly, by the
Quantifying utility outward phenomena to which they give rise: and that in those cases with
which economics is chiefly concerned the measure is found in the price
Cardinal and ordinal utility which a person is willing to pay for the fulfillment or satisfaction of his
It was recognized that utility could not be measured desire.
directly, although, ‘Revealed Preference’ can be drawn
It was recognized that utility could not be measured
directly, although, ‘Revealed Preference’ can be drawn
Thus, to measure actual behavior the underlying
relative utilities are revealed
12:18:18 12:18:18
3