April 9, 2013

Utility - What is Happiness in Economics Sense?

The meaning of utility in economics, is happiness. When I was asked how can we achieved happiness in economics perspective, I replied that your budget or money should be able to purchase the goods and services that you need or want; note, there is a big difference between need and want, I crossed my fingers and assumed you know that.

Going back to the topic, let say you need to buy a food, your money is only 50 Pesos, you want to buy a chicken worth 80 Pesos, obviously you cannot afford it. As a result you will be unhappy because you were not able to buy what you want. Yet, let say, instead of buying a chicken you bought vegetable mix worth exactly 50 Pesos; you find your self full and satisfied after the meal - as result you were happy.

Even though you were not able to buy what you want (the chicken), there is a substitute (the vegetable mix) that satisfied your need. It's good to see that there are many substitutes for different goods, at lower price. Imagine if your money is only 50 Pesos and the price of all food is 80 Pesos; I'm sure you will not like it. Good our market is competitive. Cheers!

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