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CMA Foundation · Fundamentals of Business Economics and Management · Utility, Wealth, Production

Which of the following best describes the economic meaning of 'utility'?

Utility in economics means the want-satisfying power of a commodity. It reflects the satisfaction a consumer expects or gets from consuming a good. It is subjective, so it differs from price, production cost or physical usefulness, which are separate concepts.

  1. AThe physical usefulness of a good in production
  2. BThe want-satisfying power of a commodityCorrect
  3. CThe market price paid for a commodity
  4. DThe cost incurred in producing a commodity

Explanation

In economics, utility is the capacity of a good or service to satisfy a human want. It is subjective and not the same as price, cost or physical usefulness. Hence the want-satisfying power is the correct description.

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