The document discusses the concept of utility in economics. It provides the following key points: 1. Utility is a psychological concept that refers to the power of goods and services to satisfy human wants. It is subjective rather than objective. 2. There are two approaches to analyzing utility - the cardinal approach which views utility as quantifiable, and the ordinal approach which views utility as only able to be ranked and not measured. 3. Total utility is the total satisfaction derived from consuming a good, while marginal utility is the change in total utility from consuming an additional unit of that good.

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2.  The concept was evolved by Jeremy Bentham, W.
Stanley Jevons, Leon Walrus, Carl Menger, Alfred
Marshall.
 It may be defined as the power of goods and
services to satisfy a human want directly or
indirectly.
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3. In the words of Prof. Waugh, “For
an economist, utility means the
capability to satisfy wants.”
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4. 1. UTILITY IS DIFFERENT FROM
USEFULNESS
2. IT IS A PSYCHOLOGICAL CONCEPT
3. IT IS NOT OBJECTIVE BUT SUBJECTIVE
4. IT IS EMOTIONAL AND NOT PHYSICAL
5. IT IS DIFFERENT FROM SATISFACTION
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5. 1. CARDINAL APPROACH
2. ORDINAL APPROACH
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6. Cardinal Utility analysis and Ordinal Utility Analysis
Cardinal Utility analysis Ordinal Utility Analysis
Utility Analysis
Alfred Marshal
• Can be measured in ‘utils’
• law of diminishing marginal utility
•Quantitative
•Subjective entity or personal
•Law of equi-marginal utility
•Mashellian analysis
•Uses cardinal nos.
J. R. Hicks & R.G.D. Allen
•Cannot be measured but compared as
rank
•Indifference Curve analysis
•Pysychological concept
•Uses ordinal nos.

7.  Propounded By Prof. Alfred Marshall.
 Utility derived by a consumer from various
units of a commodity or combination of
commodities is measurable in terms of some
quantifiable units.
 In terms of money or utils.
 For eg. A consumer is ready to pay Rs. 20
for a commodity – utility derived is equal to
Rs. 20 7

8.  Propounded by Allen , Pareto, Hicks.
 It is a psychological concept cannot be
measured but compared
 It can be arranged in a sequence like –
first, second, third, fourth, etc.
 For eg. A consumer can compare the
utility of a tea and coffee.
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9. TOTAL UTILITY (TU) AND MARGINAL UTILITY (MU)
Unit of
Mango
Total
Utility
Marginal
Utility
1 10
2 20
3 29
4 37
5 43
6 48
7 51
8 52
9 52
10 50
• Total Utility is the sum utility derived from the
consumption of bundle of commodity
• Marginal Utility is the rate of change of TU
from one more unit of extra consumption
MUn = TUn – TUn-1
OR
MU =∆TU/∆Q

10. TOTAL UTILITY (TU) AND MARGINAL UTILITY (MU)
Unit of
Mango
Total
Utility
Marginal
Utility
1 10 10
2 20 10
3 29 9
4 37 8
5 43 6
6 48 5
7 51 3
8 52 1
9 52 0
10 50 -2
•Total Utility is the sum utility derived from
the consumption of bundle of commodity
•Marginal Utility is the rate of change of TU
from one more unit of extra consumption
MUn = TUn – TUn-1
OR
MU =∆TU/∆Q

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