Utility

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Definition of Utility:

Utility is a term used when measuring the satisfaction a consumer receives when consuming a good or service.

Detailed Explanation:

When a shopper is deciding whether to buy a new pair of jeans that is on sale or purchase a new necklace, she will subconsciously weigh the utility of each choice and purchase the item that yields the highest satisfaction. She would not purchase either one if the utility of savings is higher. In summary, the shopper will strive to maximize her satisfaction (utility) by continuing to buy a product or service as long as the benefit gained from the product exceeds the cost of acquiring it, or the marginal benefit gained from purchasing the item is greater than or equal to the marginal cost of acquiring the item. 

Dig Deeper With These Free Lessons:

Marginal Analysis - How Decisions Are Made
Managing Scarcity
Fundamental Economic Assumptions
Opportunity Cost - The Cost of Every Decision

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