Utility is the satisfaction derived from consuming a good or service. For example, a person can satisfy his or her hunger by eating a hamburger or a bowl of noodles. In economic theory, the amount of satisfaction or utility derived is expressed in units called utils. This way, comparisons can be made more easily between different goods based on the amount of utility derived. This aids an individual in making consumption decisions including what to buy with the limited income he has and the relative amount much one is willing to pay for different goods. Thus the consumer will pay more for a hamburger worth 3 utils than a bowl of noodles worth 2 utils.
The theory or law of diminishing marginal utility (LDMU) states that the marginal utility (MU) of each unit of good consumed will fall as more units are consumed. At this point it is helpful to first define some terms. Marginal utility (MU) is defined as the extra utility derived from each unit of good consumed. Total utility (TU) is the total satisfaction derived from all units of the good consumed.
To illustrate the LDMU, take the example of the hamburger. The first hamburger consumed would logically give the consumer the highest satisfaction. When the person eats another hamburger, he may not find it as satisfying as the first one. When he eats the third or fourth hamburger, it may cease to offer any additional satisfaction because he is already full and might now be sick of hamburgers. Thus the fourth hamburger will have a negative MU or what can also be known as marginal disutility. Following this illustration, if we were to draw a graph of MU against units of hamburger consumed, it would be downward sloping, as shown below. The marginal utility curves of each individual would ...
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...son may not be the same for another person. Furthermore, satisfaction is subject to various psychological factors that are impossible to quantify. The assumption that consumers are rational utility maximisers is also unrealistic. Consumers influenced by marketing techniques or those ignorant of important information make decisions that do not maximize satisfaction. The theory only applies of the marginal utility of money is constant but in reality, the rich are more extravagant in spending because of the abundance of money they have. Also, the theory fails to explain market demand curves that are upward sloping in the cases of Giffen goods and Veblen goods.
There is difficulty in attempting to add up individual marginal utility curves to form the market demand curve because of the above criticisms. The result is likely to deviate from the actual market demand curve.
The Principle of Utility is Bentham’s description of what guides our moral behavior. According to Bentham, nature has put people “under the governance of two sovereign masters, pain and pleasure” (Pg. 33). It is in this natural world where pain and pleasure control the actions of people, “ pain and pleasure govern in all we do, in all we say, in all we think…” Pain and pleasure drive people’s decisions, and this is the basis for Bentham’s Principle of Utility.
According to (Moore & Parker, 2009, p. 441) Utilitarianism is the view that says “if an act will produce more happiness than will alternatives, it is the right thing to do, and if it will produce less happiness, it would be wrong to do it in place of an alternative that would produce more happiness”.
John Stuart Mill claims that people often misinterpret utility as the test for right and wrong. This definition of utility restricts the term and denounces its meaning to being opposed to pleasure. Mill defines utility as units of happiness caused by an action without the unhappiness caused by an action. He calls this the Greatest Happiness Principle or the Principle of Utility. Mill’s principle states that actions are right when they tend to promote happiness and are wrong when they tend to produce the reverse of happiness. Happiness is defined as intended pleasure and the absence of pain while unhappiness is defined as pain and the lack of pleasure. Therefore, Mill claims, pleasure and happiness are the only things desirable and good. Mill’s definition of utilitarianism claims that act...
Nineteenth century British philosophers, Jeremy Bentham and John Stuart Mill sum up their theory of Utilitarianism, or the “principle of utility,” which is defined as, “actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness” (Munson, 2012, p. 863). This theory’s main focus is to observe the consequences of an action(s), rather than the action itself. The utility, or usef...
...oncept of well-being. Overall, the amalgamation of the inconsistencies and errors I have attempted to highlight with my arguments I think prove my original hypothesis, that actual preference theory does not offer the correct account of well-being, because the arguments show that the fulfilment of a preference does not always produce consequences that are conducive to
Utilitarianism is a moral theory that seeks to define right and wrong actions based solely on the consequences they produce. By utilitarian standards, an act is determined to be right if and only if it produces the greatest total amount of happiness for everyone. Happiness (or utility) is defined as the amount of pleasure less the amount of pain (Mill, 172). In order to act in accordance with utilitarianism, the agent must not only impartially attend to the pleasure of everyone, but they must also do so universally, meaning that everyone in the world is factored into the morality of the action.
Utilitarianism is consequentialist ethical system that focuses on the results of actions, rather than the actions themselves. Utilitarian ethics, attributed to Jeremy Bentham, also argue that humans are naturally driven to seek pleasure and avoid pain. Therefore, in utilitarian ethics, just actions are those that maximize happiness, utility, and minimize unhappiness. Utilitarian ethics also argue that happiness must be maximized for the greatest number of people, rather than focusing on the individual pursuit of pleasure. Utilitarianisms strengths lie in its societal applications, allowing decision making bodies that benefit large groups, rather than looking purely individualistically. It also offers a stronger justification if one accepts the base principle that happiness is universally better than unhappiness. One of the main difficulties in applying utilitarian ethics is the challenge of quantifying happiness. It is impossible to empirically measure happiness. Utilitarianism also opens itself to hypotheticals that yield unpleasant results. Under pure utilitarianism, if it would increase the safety, and therefore happiness, of a society to torture or kill innocents suspected of a crime, it would follow that such action was ethically just. Subsequent utilitarians have offered more nuanced versions of the hedonic calculus and ideas of rule utilitarianism that look at overall moral rules
“Marginal analysis involves changing the value(s) of the choice variable(s) by a small amount to see if the objective function can be further increased (in the case of maximization problems) or further decreased (in the case of minimization problems)” (Thomas & Maurice, 2012, pp. 91). Marginal analysis is known as “the central organizing principle of economic theory” for its importance and applicability to many aspects of our daily lives as well as our careers (Thomas & Maurice, 2012, pp. 94). The key concepts of marginal analysis include total benefit, total cost, marginal benefit, marginal cost and net benefit. These concepts all come together to play a significant role in the use of marginal analysis to reach the optimal desired outcome.
Utilitarianism is a difficult topic to fathom, for it requires a large amount of questions and self-evaluation. In order to understand utilitarianism, think of bad versus bad. A principle stating that when one is faced with two difficult decisions, which choice would be less harmful for all of those involved? John Stuart Mill and Bernard Williams describe utilitarianism as pain versus pleasure or the lesser of two evils approach, and how that approach ties into ones ultimate choice. Utilitarianism is not about the pursuit of happiness, rather, it is really about picking which evil is the best evil.
Utilitarians believe that the moral worth of an action is determined solely by its contribution to overall utility, otherwise known as the Greatest Happiness theory. Most people now would be considered to be utilitarian because many believe that something could be morally right if it gives good results a greater amount of people. A modern parallel to the attitude of utilitarianism are
...ARLS, K., 1994. The impact of modernity on consumption: Simmel's Philosophy of Money. Advances in Consumer Research, 21, pp. 65-65.
A disadvantage of utilitarianism is that it fails to acknowledge the rights of each person, thus advocating injustice acts. People can suffer from immediate consequences of an action fulfilled by being “utilitarian”. Utilitarianism ignores the importance of moral obligation. It is still our duty to decide upon a wrong or right act and not take in consideration the amount of good or evil it produces. Lastly, moral dilemmas only happen because either quality or quantity of “good” or “pleasure” is in doubt. A person deciding whether to do a moral act has to take in consideration the maximization of happiness and pleasure to the
However, as already seen, the relationship between income and general life satisfaction was mainly explained by whether material aspirations (such as buying luxury goods) could be fulfilled.” In other words, one’s concept of happiness can vary from nation to nation. For example, people living in poor nations and having a low income tend to be satisfied by having just enough to meet their necessities. While, on the other hand, people with higher income tend to be satisfied if they have enough to buy luxury goods. Being wealthy does not lead one to happiness; it can help some people to obtain happiness, but it can also lead others to have unwanted experiences.
Both Jeremy Bentham and John Stuart Mill, had thoughts of the Principle of Utility and what it should be like. Bentham believes that the Principle of Utility depends on pain and pleasure and Mill believes that the Principle of Utility depends on higher pleasures and lower pleasures. Pain meaning evil and pleasure meaning good or greater benefits and higher pleasures meaning that action was good which would lead to a higher level of happiness and lower pleasures meaning bad which would lead to a decreasing level of happiness. Therefore, a normative ethical theory that has come through from this and it is Utilitarianism. The definition of Utilitarianism is a course of action that maximizes the total
... Also important is the price of complements, or goods that are used together. When the price of gasoline rises, the demand for cars falls.