Glamor Economics

Chapter 40

Chapter 6 Section 3 Satisfaction is valuable——Consumer Utility

There was a poor man and a rich man in the village, and one day there was a sudden flood.The poor man climbed up a tree carrying the most precious thing in his family-a bag of steamed buns, and the rich man climbed up the tree carrying the most precious thing in his family-a bag of gold.The floodwaters show no signs of receding.On the first day, the poor man ate a steamed bun, but the rich man ate nothing and watched the poor man eat.The next day, the poor man ate another steamed bun, and the rich man's belly was already beating.On the third day, the rich couldn't bear it anymore, so he said to the poor: "I will exchange a piece of gold for you for a steamed bun." So, the rich and the poor finally survived this difficult period.In this difficult period, steamed buns are undoubtedly more useful to people than gold.

This story leads to an important concept in economics - "utility".In economics, utility is a measure of the happiness or satisfaction a consumer obtains from a set of goods and services.With this kind of measure, we can have a reference when talking about the increase or decrease of utility, so we can also have a measure when explaining whether an economic behavior brings benefits.Utility is different from the use value of the item itself.The use value and the attribute of the item are objective; the utility is the feeling of the consumer when consuming a certain item.

"Utility value theory" emphasizes the degree of satisfaction of things to people, and the degree of satisfaction is entirely a subjective feeling, and subjective value is the basis of objective exchange value.Economics relies on a basic premise that people, when making choices, tend to choose those goods and services that they consider to be of the highest value.Utility is the subjective feeling of consumers, which depends on how much consumers like this item, that is, preference.The greater the consumer's preference for a certain item, the greater the utility that this item brings to him, the more he is willing to buy, and the higher the demand.We can also interpret utility through the change of red-shelled eggs and white-shelled eggs.

Ms. Liu from Dalian needs to buy white-skinned eggs in order to make a recipe.This should not be a difficult task. Unexpectedly, Ms. Liu went to several nearby farmers' markets, but could not find white eggs.Finally, I found some white-skinned eggs at an egg stall in a market in Shahekou District, but the price was almost twice as expensive as red-skinned eggs. "I didn't notice it before, but after I bought it, I realized that the market is full of red-skinned eggs. Where are the white-skinned eggs?" Ms. Liu couldn't help asking such a question.

Neither the taste nor the nutritional value of eggs has anything to do with the color of the eggshell.Why are the white-skinned eggs that used to fill the market gone?In many areas of our country, people like red eggs.Red gives people a symbol of auspiciousness. When it flooded into the market in large quantities and the price was the same as that of white-skinned eggs, most citizens chose it, which provided conditions for it to seize the market.Because people have a greater sense of satisfaction in consuming red-shelled eggs, today's situation of "the market is full of red-shelled eggs" has been caused.

Will people buy red-shelled eggs now to achieve the same effect as before?The answer is of course no.Red-shell eggs are very attractive, but when red-shell eggs flood the market, people's satisfaction with red-shell eggs will gradually decrease, that is, the marginal utility will decrease.This also explains why white-shell eggs are more expensive than red-shell eggs now.

[links to related words]

Consumption utility refers to all the satisfaction consumers get from the consumption of goods and services. For example, people will have appetite when they are hungry, and consumption of food can satisfy their appetite.Consumption utility is the way consumers choose between different consumption possibilities.When we evaluate the value of a thing, a career, or a way of life, we do so purely based on our own subjective feelings, rather than caring about what others think (provided we don’t get in the way of others).

(End of this chapter)