Blackwell Reference Online

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Total utility is the total benefit or satisfaction an individual receives by consuming goods or taking part in an activity. For example, consumers acquire utility from the product attributes in the goods and services that they purchase ( see product attributes model ). These items fulfill various physical and psychic needs. Similarly, workers gain utility from their jobs, from the satisfaction of accomplishment, and also from the income that is generated. While consumer utility arises from the goods themselves, giving to others (e.g., gifts, charity) also generates utility, as can the actual purchase of the good (e.g., “finding a real bargain”). An individual's preferences toward risk can also be identified, through an examination of the level of utility generated from different levels of income ( see risk aversion ). In the economic theory of consumer behavior, total utility is typically assumed to increase with an increase in the number of units of any one good, and with an increase in the total number of all goods. In other words, for most items, known as economic goods , more is preferred to less. As the rate of consumption per period of any one good grows, however, the total utility tends to increase at a decreasing rate, as the first units of the good provide the highest utility and additional units eventually generate less utility ( see diminishing marginal utility ). ... log in or subscribe to read full text