Utility

An economic concept referring to the precise degree of personal satisfaction, pleasure, or sense of want-fulfillment an individual derives from consuming some quantity of a good or service at a particular point in time. Obviously no two persons assign identical utilities to any given good because human tastes and preferences vary sharply. Nor is there any standard objective unit in which both "utility for me" and "utility for thee" can be measured and compared to each other. But presumably each of us can at least roughly compare the utilities of various possible goods (or combinations of goods) to ourselves and decide "since I have to choose, I would much rather have this than that, all things considered." The concept of precisely measurable utility was at the heart of the derivation of the classical theory of demand, in the form of the law of diminishing marginal utility. Nowadays, most theorists prefer the derivation of demand derived from the "indifference curve" analysis popularized in the 1930s by J.R. Hicks, which reaches essentially the same conclusions as the older utility analysis, without the unnecessary assumption that individuals are capable of measuring their own utilities in so precise a fashion.

[See also: marginal analysis]