Utility is a fundamental concept in economics that refers to the satisfaction or happiness that a consumer derives from consuming a particular good or service. It helps consumers to make choices by comparing the level of satisfaction they can obtain from different goods or services. However, there are some misconceptions about utility that need clarification.

Utility is not always measurable

One common misconception is that utility is always measurable. However, this is not true because utility is a subjective and intangible concept that varies across individuals and circumstances. It is difficult to quantify the level of satisfaction that a consumer derives from a good or service because it depends on factors such as personal preferences, expectations, past experiences, and social norms. While economists use the concept of utility to explain consumer behavior and predict market outcomes, they do not assign a specific numerical value to it.

Utility is a satisfying power of a commodity

Another misconception is that utility is a satisfying power of a commodity. While it is true that a commodity can provide utility to a consumer, it is not the commodity itself that creates utility, but rather the consumer's perception of it. For example, a cup of coffee may provide utility to one person who enjoys the taste and aroma, but not to another person who dislikes coffee. Therefore, utility is a subjective experience that depends on the individual's preferences and tastes.

Utility helps consumers to make choices

One of the main functions of utility is to help consumers to make rational choices by comparing the marginal utility (additional satisfaction) that they can obtain from consuming one more unit of a good or service to its price. If the marginal utility exceeds the price, the consumer will continue to consume more units until the two are equalized. This principle is known as the law of diminishing marginal utility, which states that as a consumer consumes more and more units of a good or service, the marginal utility of each additional unit decreases.

Utility is purely a subjective entity

Finally, it is important to note that utility is purely a subjective entity, which means that it cannot be observed or measured objectively. While economists can make assumptions about the utility that consumers derive from different goods or services, they cannot verify these assumptions empirically. Therefore, the concept of utility is based on the assumption of rationality and subjective preferences, which are the foundation of microeconomic theory.

Because according to Marshall utility can be measured in utiles but Hicks and Allen said that we cannot measure utility we can only rank it.