Utility is the satisfaction derived from?

1. Analyze the question The question asks which economic activity gives rise to utility, which is the satisfaction a person gets.

2. Explain the concept In Economics, utility is the satisfaction, pleasure, or benefit a consumer gets from using (consuming) a good or service. It is a subjective idea: different people get different levels of satisfaction from the same item.

Types of utility you should know:

• Total utility: the overall satisfaction from consuming all units of a good.
• Marginal utility: the extra satisfaction from consuming one more unit.
• Form, place, time and possession utility: these are created during production and distribution, but the satisfaction itself is only realized when the good is consumed.

3. Step-by-step solution

• A. Production: this is the creation of goods and services. It creates utility (for example, turning cocoa into chocolate), but it is not where the satisfaction is derived.
• B. Distribution: this moves goods from producers to consumers. It adds place and time utility, but again, it is not where satisfaction is felt.
• C. Consumption: this is the actual use of goods and services to satisfy wants. This is where the satisfaction is derived.
• D. Demand: this is the willingness and ability to buy a good at a given price. It reflects utility but is not the source of it.

4. Answer Utility is the satisfaction derived from consumption.

5. Exam tip Remember the link: Production creates utility, consumption gives utility. If a JAMB question uses the words "satisfaction derived from," think consumption. If it says "creation of utility," think production.