In economics, Utility is very often associated with consumers. Utility represents the satisfaction received by consumers for using a product or service.
What are Utilities?
The utility is a term used in economics to refer to the overall satisfaction one receives from consuming a good or service.
Consumer satisfaction in trying a product or service is very important to understand. Not only that, prices and goods and services can be affected by the demand for something.
The higher the Utility of goods and services, the more demand for these goods and services by consumers. In everyday life, the level of customer satisfaction is often considered unmeasurable.
What Are the Functions of Utilities?
The utility function is to measure the level of satisfaction and how much consumers feel about the experience of enjoying goods and services.
That way, consumers can play a role in liking or disliking these goods and services.
After that, the value of consumer satisfaction with goods and services the higher the utility value. This is what makes the value of a company can increase and vice versa.
Types of Utilities
Some utilities also consist of several types, including the following:
1. Forms Utility
Form utility is a type of value that refers to how good a product of goods and services it has.
For example, companies design goods and services to meet the needs of these consumers.
Form utilities could offer consumers lower prices, more convenience, and a wider selection of products.
The goal is to increase and maximize the product’s value that will be felt.
2. Place Utility
Place utility makes goods and services available directly or physically so that potential and regular customers can easily access them.
Examples of the utility of place range from offline stores to how easy it is to find websites on the internet.
A company with an effective SEO strategy can increase the Utility of the place.
3. Time Utility
Time utility is a type of Utility oriented towards the availability of goods and services so that consumers can buy them when they want.
An example of a time utility is a store open until the weekend if consumers are used to shopping for goods and services at that time.
The time utility includes 24-hour availability for customer service through a specified number.
4. Proprietary Utility
Ownership utility is the sum of the perceived uses of the product owner.
An example of ownership utility is that if a consumer owns a luxury vehicle or luxury item, it will be considered a high ownership utility.
In addition, you can also increase the convenience or gain access to ownership will increase the perceived ownership utility of goods and services.
Why Are Utilities Considered Important in Crypto?
The utility is important in crypto because it closely relates to the law of supply and demand.
Consumers think of buying something because the item displays some value.
Furthermore, consumers also create demand for goods because they can provide Utility. The higher the level of satisfaction offered by a product or service, the more consumers will want the product.
This increase in demand can lead to skyrocketing price hikes, which in turn create other businesses that produce these goods.
The Utility Approach
Total Utility is the whole level of satisfaction obtained from consuming a certain number of goods and services. In utilities, there are two approaches as follows:
1. Cardinal utility
Cardinal utility is part of rational choice theory, which argues that everyone works to increase the attainment and maximize utility costs for customer satisfaction.
Cardinal utility is obtained from the results of consumer satisfaction in consuming goods and services, which can be expressed numerically.
An example of a cardinal utility is when you want to buy clothes at a store, but when you arrive at the destination store, the clothes you want to buy are much more expensive than you expect.
Then you will cancel buying the clothes because you feel that the expensive clothes are not worth the price you have to pay.
2. Ordinal Utility
Ordinal Utility is obtained from the results of consumer satisfaction in consuming goods and services but cannot be measured numerically.
In one way of this approach, ordinal Utility becomes a person’s psychological phenomena such as satisfaction, happiness, etc
An example of ordinal Utility is when you want to buy clothes at a store, but when you arrive at the destination shop, the clothes you want to buy are more expensive than you expected.
Then you will continue to buy these clothes because you feel that expensive clothes are worth the price you have to pay.
After you have these clothes, you will get satisfaction from buying these clothes.
Utilities Limitations and Benefits
Economists, however, cannot assign a correct numerical value to the consumer’s level of satisfaction with the choice or the way it works. After that, you determine why the purchase can be difficult if there are many considerations.
For example, when you buy a car, but the car is identical to other cars. The difference may be from the features offered by these products.
Over time, selections and references may reflect changes in Utility.
Inside the Utility, there is also a token. A utility token is a digital asset used to operate blockchain services.
Apart from that, there are many utility approaches that you should know, such as cardinal Utility, marginal Utility, and ownership Utility. For economists, establishing utility values can still be useful.
The utility is a term used in economics to refer to the overall satisfaction received from consuming a good or service.
Consumer satisfaction in trying a product or service is very important to understand.
There are four types of Utility, namely form Utility, place utility, time utility, and ownership utility. Utility is important because it is closely related to the law of supply and demand.
There are two utility approaches, namely cardinal Utility and ordinal Utility. Each of the utilities has these differences.
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