Question

Which phrase best describes utility?

Utility is

the contribution of a particular good or service to GDP.

the amount of money a consumer is willing to pay to gain a given amount of consumption.

a measure of consumer satisfaction.

a measure of how useful a good or service is in acquiring income or wealth for a consumer.

How do economists measure utility?

Economists

measure utility in a laboratory by analyzing the responses of volunteers.

use surveys to rate the usefulness of goods and services after they are purchased.

do not measure utility. It is a hypothetical measure used for modeling behavior.

use data such as prices and purchase information to measure utility.

Answer 1

1. Utility is a measure of consumer satisfaction.

• Utility can be defined as the level of satisfaction a person gets by consuming an additional unit of any good.
• Hence it is referred to a measure of consumer satisfaction and it model's a goods value or level of usefulness.

2. It is a hypothetical measure used for modelling behaviour.

• Economists usually measure utility using a unit called a util. A util is a hypothetical measure used for modelling behaviour of customers.
• It is standard unit used by the Economists to measure utility.