Utility and prices.
In the beginning I would like to say that according to our basic needs and optional individual wants we require many kinds of commodities, which satisfy our wants in different ways. The characteristic of satisfying want is known in economics as utility. It should be said that the utility change is concerned with the consumer’ relation to a commodity.
I want to pay your attention to the fact that utility should not be confused with usefulness. And we also can determine utility as the relationship between a consumer and a commodity.
Now let me move to the next point of my presentation. Without a shadow of a doubt I can say that utility varies not only in relation to individual tastes and to geography but also in relation to the quantity which is available to the consumer. The utility of a commodity therefore decrease as the consumer’s stock of that commodity increases.
Now I’d like to touch upon the next topic. There are many economic systems and in some of them it’ possible for an individual to bargain over prices, because they are not fixed in advance. But generally individual can not change the price and people must accept these fixed prices. But with each successful purchase their satisfaction compensates less the loss of money. And a point in time comes when the finance sacrifice is greater than the satisfaction of commodities. Due to this we can ay about changing of the marginal utility. The consumer’s desire for a commodity tends to diminish as he buys more units of it. This tendency is called the law of Diminishing marginal Utility.
Now I want to turn to the last but not the least point. Speaking about prices I’d like to focus your attention on that they can determine the interaction of buyers and sellers. Shortage and surplus indicate that the price is too low or too high. A society may interfere in market prices by means of price control and rational stamps. In the market economy prices are the result of needs of both buyers and sellers. When the price the supply equals the price the demand we can say about the equilibrium price. Since no surplice or shortage exists there is no pressure on the price change.
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