Utility, in economics, is the ability of the good or service to fill the wants or needs of the consumer and the ability to hold preference over other goods or services. Utility is essentially a quantitative measure for the level of satisfaction or enjoyment received my a consumer in consuming a specific good or service. Utility is used to determine how much a consumer will be willing to pay for a good or service and what combination of goods or services will provide the highest amount of satisfaction.
When assessing economic utility, the greater the utility number, the greater the satisfaction that the consumer received from the good. It is also important to recognize that utility numbers cannot be used to make calculations because they are not concrete numbers. Economics separates utility theory into cardinal utility and ordinal utility, where ordinal follows the idea that a good or service cannot be measured in numerical terms and cardinal utility theory sees differences in utility as quantitative differences in behaviour.
Note that utility theory functions on the assumption that individual consumers have a consistent set of preferences that remain unchanged for the period of time measured. Utility is usually presented in an indifference curve, which plots the different amounts of combinations of goods and services that would maintain an equal level of satisfaction for the consumer.© BrainMass Inc. brainmass.com May 8, 2021, 3:50 pm ad1c9bdddf