What is Utility?

Utility is the total satisfaction or benefits derived from consuming a good or service. Economic
theories based on rational choice usually assume that consumers will strive to maximize their
utility.

Ordinal Utility
In economics, an ordinal utility function is a function representing the preferences of an agent on an
ordinal scale. Ordinal utility theory claims that it is only meaningful to ask which option is better than
the other, but it is meaningless to ask how much better it is or how good it is.

Cardinal Utility

The cardinal utility states that the level of satisfaction a consumer acquires after
consuming any goods and services can be measurable and expressed in quantitative
numbers.

Total Utility

Total utility refers to the amount of satisfaction that a consumer derives from a
specific product or service. It is simply an individual sum of units of all the
marginal utilities.

Marginal Utility
Marginal utility is the added satisfaction that a consumer gets from having one more unit
of a good or service.

Law of diminishing marginal utility.

According to the Law of Diminishing Marginal Utility, marginal utility of a good diminishes as
an individual consumes more units of a good. In other words, as a consumer takes more
units of a good, the extra utility or satisfaction that he derives from an extra unit of the good
goes on falling.
Equi-marginal principle
The equi-marginal principle states that a consumer will be maximizing his total utility when
he allocates his fixed money income in such a way that the utility derived from the last
unit of money spent on each good is equal.