This a MCQ (Multiple Choice Question) based practice test of Chapter 2- Theory of Consumer Behaviour of Economics of Class XII (12) for the quick revision/preparation of School Board examinationsQ Which of the following statements regarding utility is not true?a)It helps consumers to make choices.b)Utility is always measurable.c)It is a satisfying power of a commodity.d)It is purely a subjective entity.Correct answer is option 'B'. Can you explain this answer?

Question

Answer

Utility is an economic term referring to the total satisfaction received from consuming a good or service. The economic utility of a good or service is important to understand because it will directly influence the demand, and therefore price, of that good or service. A consumer's utility is hard to measure, however, but it can be determined indirectly with consumer behavior theories, which assume that consumers will strive to maximize their utility.

Answer

Answer

Explanation:

Introduction:
Utility is a fundamental concept in economics that refers to the satisfaction or pleasure that consumers derive from consuming a particular good or service. It plays a crucial role in the theory of consumer behavior, as it helps consumers make choices and determine their preferences.

Explanation of the options:
a) It helps consumers to make choices: This statement is true. Utility is a measure of the satisfaction that consumers derive from consuming goods and services. It helps consumers make choices by comparing the utility they expect to derive from different alternatives.

b) Utility is always measurable: This statement is not true. Utility is a subjective entity and cannot be measured in an objective manner. It is based on individual preferences and varies from person to person. While economists can assign numerical values to utility for analytical purposes, these values are not absolute and cannot be compared across individuals.

c) It is a satisfying power of a commodity: This statement is true. Utility represents the satisfying power or the ability of a commodity to satisfy human wants. It is the underlying reason for why consumers demand goods and services.

d) It is purely a subjective entity: This statement is true. Utility is a subjective concept that is based on individual preferences and perceptions. It cannot be objectively measured or quantified. It varies from person to person and is influenced by factors such as tastes, preferences, and experiences.

Conclusion:
In conclusion, the statement that is not true regarding utility is 'Utility is always measurable' (option B). Utility is a subjective entity that cannot be measured in an objective manner. It is a satisfying power of a commodity and helps consumers make choices, but its measurement varies from person to person.

Answer

Utility can be measured cardinally according to Marshall, but according to Hicks (ordinal approach) we can rank our preferences so utility is not always measurable cardinally.

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