Theory of Consumer Behaviour | Class 12 Economics Notes

2.1 UTILITY

Utility is the want-satisfying capacity of a commodity, meaning the satisfaction or pleasure a consumer derives from consuming it. It is subjective and varies across individuals and contexts. For example, a person fond of chocolates derives more utility from chocolates than someone who is indifferent to them. Utility can also vary with place and time; a room heater has more utility in cold Ladakh than in hot Chennai, or in winter than in summer. Cardinal Utility Analysis assumes utility can be measured numerically, allowing the calculation of Total Utility (TU) and Marginal Utility (MU). Total Utility is the total satisfaction from consuming a certain quantity of a good, while Marginal Utility is the additional satisfaction from consuming one more unit of the good. For example, if consuming 4 bananas gives 28 units of TU and 5 bananas give 30 units, the MU of the 5th banana is 2 units (30 - 28). The law of diminishing marginal utility states that as consumption of a good increases, the MU from each additional unit declines, holding other factors constant. This explains why TU increases at a decreasing rate and eventually may decline if consumption continues. The utility concept helps explain consumer demand and choice behaviour.

📊 Diagram: See table_1 and figure_3: Table shows units consumed with corresponding total and marginal utility values; Figure 2.1 graphically depicts diminishing marginal utility with TU curve increasing at a decreasing rate and MU curve declining.

🧪 Activity: No specific activity in this section.

🔗 Connection: Leads to derivation of demand curve using cardinal utility and then to ordinal utility analysis.

Table on page 2 (7×3)

Table on page 27 (10×2)