Utility, Value, and Prices

These flashcards cover key concepts related to utility, value, and prices, emphasizing definitions and characteristics important for understanding consumer behavior.

Utility

The satisfaction or enjoyment that a consumer obtains from consuming a product.

Types of Utility

The different forms of utility: form, place, time, and possession.

Utility of Form

The product must be in the right form to satisfy a consumer's want (e.g., wood becomes a chair).

Utility of Place

An item must be in the right place for the consumer to obtain satisfaction (e.g., a cell phone has low utility without network coverage).

Utility of Time

A product must be available at the time it is needed to satisfy a want (e.g., a warm jacket provides utility on a cold day).

Utility of Possession

A product only provides utility if the person has it in their possession.

Characteristics of Utility

Utility varies from person to person, is immeasurable, not the same as usefulness, diminishes with quantity, and influences willingness to pay.

Marginal Utility

The additional utility gained from consuming one additional unit of a product.

Law of Diminishing Marginal Utility

As consumption of a product increases, the utility obtained from each additional unit decreases.

Utils

Imaginary units of measurement used by economists to quantify utility.