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

Which of the following is an example of 'form utility' created by a firm?

Converting cotton fabric into shirts is form utility, because utility is created by changing the physical form of the material. Storage gives time utility and transport gives place utility, while instalment payment changes neither the form, place nor time of the goods.

  1. AA wholesaler storing wheat in a warehouse until the off-season
  2. BA transporter moving cement from a factory to a distant construction site
  3. CA garment unit converting cotton fabric into shirtsCorrect
  4. DA retailer allowing customers to pay in instalments

Explanation

Form utility arises when the physical shape or form of a material is changed to make it more useful. Converting fabric into shirts does this. Storing goods creates time utility, moving goods creates place utility, and instalment payment is a service or financing convenience, not a change in form.

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