What Is Consumer Utility?

by Elise Moore; Updated September 26, 2017
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Consumer utility is a central concept of consumer demand theory, the branch of economics devoted to the study of consumer behavior.

Consumer Demand

Consumer demand theory analyzes consumer behavior, especially purchasing behavior, based on the satisfaction of wants and needs by consumption of goods.

Utility Theory

Jeremy Bentham coined the term “utility” in the 1700s to refer to the satisfaction of wants and needs and developed the theory that people are motivated by the desire to maximize utility. John Stuart Mill extended and popularized Bentham's work, and William Stanley Jevons introduced the concept of marginal utility.

Total and Marginal Utility

Consumer demand theory involves an analysis of total and marginal utility. Marginal utility is the additional satisfaction from consuming one more unit of a good, and total utility is the sum of the marginal utilities.

Law of Diminishing Marginal Utility

This law states that marginal utility decreases as the quantity consumed increases. While total utility increases the more you consume, marginal utility decreases, so that with each additional unit consumed, total utility grows less rapidly.

Significance

If each additional unit of a good is less satisfying, the buyer is willing to pay less and demand price declines. Thus, there is an inverse relation between demand price and quantity demanded.

About the Author

Elise Moore has a master's degree in English. She enjoys writing about party planning and has greatly expanded her knowledge of the visual and plastic arts while researching articles for various websites.

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