Utility is a term used in economics to determine the worth or value of a good or service. It is the total satisfaction or benefit derived from consuming a good or service. The concept of utility has evolved over time, initially introduced as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill. In modern economic theory, utility is represented as a utility function that represents a consumers ordinal preferences over a choice set, but is not necessarily comparable across consumers or possessing a cardinal interpretation.
Utility is important to understand because it directly influences the demand and therefore price of a good or service. Products with higher utility usually have more demand, meaning they can command higher prices. However, a consumer's utility is usually impossible to measure or quantify. Some economists believe that they can indirectly estimate the utility of an economic good or service by employing various models.
In addition to its economic meaning, utility can also refer to a service provided by a public utility, such as electricity or gas supply. It can also refer to the usefulness of something, especially in a practical way.
