About Utility

• Author: Catalin Angelo Ioan
• Pages: 242-245

European Integration - Realities and Perspectives. Proceedings 2017

242

About Utility

Catalin Angelo Ioan1

Abstract: The concept of utility is one of major interest in any serious approach to microeconomic phenomena.

The article discusses a number of issues regarding the actual method of determining usefulness based on

relationships and preferably indifference and facets of marginal utility.

Keywords: utility; marginal; indifference

1. Introduction

The utility, along with the production function represents the key concepts of any microeconomic theory.

The utility always stayed in the center of debates and polemics of economical nature, from the simple

fact that while the rest concepts were more or less clear, it was often a nebulous especially in terms of

actual implementation.

At Physiocrats the concept of utility is confused with value, utility being in fact the difference between

the utility created and consumed, while the value is given by the difference between price and cost of

production (Ioan, 2017).

For Adam Smith, the utility is given by the value of use which “is more a matter of individual and

subjective” (Ioan, 2017).

In “On the Principles of Political Economy and Taxation”, David Ricardo says that the utility or use

value is a necessary condition of exchange value, but is not the unit of its (Ioan, 2017).

John Stuart Mill believes that the usefulness of a good is only its ability to satisfy a desire (Stuart, 1848).

A qualitative leap in the approach of the utility is brought by Carl Menger which, in his Principles of

Economics, introduces the concept of marginal utility.

The founder of the School of Lausanne, Leon Walras considers the final degree of utility as last intensity

needs met by a certain amount of goods consumed.

2. What is the Utility?

In most scientific works, utility or satisfaction is achieved by the consumption of a particular good or

unit of preferences for a specific good or basket of goods and services.

1 Associate Professor, PhD, Department of Economics, Danubius University of Galati, Romania, Address: 3 Galati Blvd.,

Galati 800654, Romania, Tel.: +40372361102, Corresponding author: catalin_angelo_ioan@univ-danubius.ro.