Reading

MATERI KULIAH

4. Reading.

 

About a Economy :

 

UTILITY AND PRICES

 

Our basic needs are simple, but our additional individual wants are often very complex. Commodities of different kinds satisfy our wants in different ways. A banana, a bottle of medicine and a textbook satisfy very different wants. The banana cannot satisfy the same wants as the textbook.

 

This characteristic of satisfying a want is know in ecomics asits “utility”. Utility, however, should not be confused with usefulness. For example, a submarine may or may not be useful in time of peace, but it satisfies a wants. Many nations want submarines. Ecomists say that utility determines “the relationship between a consumer and a commodity”

 

Utility varies between different people and between different nations. A vegetarian does not want meat, but may rate the utility of bananas very highly. while a meat eater my prefer steak. A mountain – republic like switzerland has little interset in submarines, while maritime nations rate them highly.

 

Utility varies not only in relation to individual tastes and to geography, but also in relation to time. In wartime, the utility of boms is high , and the utility of pianos is low. Uitlity is therefore related to our decisoas about priorities in productions particularly economy. The production of pianos falls sharply in wartime.

 

The utility of a commodity is also related to the quantity which is avaiable to the consumer. If paper is freely avaiable, people wil not be so interested in buying too much of it. If there is an excess is paper, the relative demand for paper will go down. We can say that the utility of a commodity increases

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