Utility facts for kids

Not to be confused with Public utility

In economics, utility is a word for the amount of satisfaction or usefulness you get. You feel this satisfaction when you use or consume goods and products. Think of it as how much "good" something does for you.

For example, imagine you are very thirsty. A glass of water would have high utility for you. If you are not thirsty, that same glass of water might have less utility.

What is Utility?

Utility helps us understand why people choose certain things. It explains why you might pick one snack over another. It's all about what makes you feel the most satisfied.

Measuring Utility

Economists sometimes talk about changes in utility as "utils." However, there isn't a real, standard way to measure utils. It's more of a concept.

• For instance, a warm cup of hot chocolate on a cold day might give you 100 "utils."
• A glass of orange juice might give you 80 "utils."

This idea helps economists compare how much satisfaction different things provide.

Utility of Money

One important use of utility in economics is the utility of money. Money itself doesn't give satisfaction. But it can be used to buy things that do.

• The first bit of money you earn might have very high utility. It helps you buy basic needs like food or clothes.
• As you get more and more money, each extra bit might give you a little less additional satisfaction. This is called "diminishing marginal utility."

Why is Utility Important?

Understanding utility helps economists explain many things. It shows how people make choices about what to buy. It also helps businesses decide what products to make. They want to create things that give people high utility.

Making Choices

When you decide what to buy, you are often thinking about utility. You choose the item that you believe will give you the most satisfaction. This happens even if you don't think about "utils."

• Do you buy a new video game or a new pair of shoes?
• Your choice depends on which item you think will bring you more happiness or usefulness.

See also

In Spanish: Utilidad (economía) para niños