Economic Utility

Economic utility refers to the capacity of an economic good to satisfy an economic need. This utility doesn't stem from the good’s objective features, but rather from how useful it is perceived to be by individuals. For a good to be considered economically useful, the individual must be aware (accurately or not) of its actual or presumed ability to meet a specific economic need. Since it depends on personal perception, economic utility naturally varies from one person to another.

Types of economic utility

Economic utility can take different forms depending on the kind of need it addresses. We refer to use utility when a good directly satisfies a need (like bread for someone who’s hungry), and exchange utility when the good isn’t used directly but is traded to acquire other goods or services (such as money).

In economics, the term marginal utility is commonly used to describe the extra satisfaction someone gains from consuming one additional unit of a good. Typically, marginal utility decreases as consumption increases. For example: the first glass of water after a run can be incredibly refreshing, the second a bit less so, the third even less. Eventually, it may offer little benefit or might even become unpleasant.

Practical example: A tourist visiting a historic city might find great economic utility in a printed guidebook, while a local resident who already knows the city might find it completely unnecessary. This shows how economic utility depends on the individual’s circumstances and familiarity with the good.

Relationship with scarcity

Economic utility is closely tied to the concept of scarcity: a good is considered economic only if it is both useful and scarce. Air, for example, is certainly useful, but usually has no economic utility because it's abundantly available and requires no effort to obtain. In contrast, in a confined setting like a spacecraft, even air gains economic utility because it becomes a limited resource.

Distinction between utility and economic utility

Economic utility is not the same as utility in a general sense; rather, it is a subset of utility. A good can be useful (like air) without having economic utility if it doesn’t fulfill an economic need (such as breathing). On the other hand, all goods that provide economic utility are, by definition, also useful.