utility and price materi

7/24/2019 Utility and Price Materi

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Our basic needs are simple, but our additional

individual wants are often very complex.

Commodities of different kinds satisfy ourwants in different ways. A banana, a bottle of

medicine and a textbook satisfy very different

wants. The banana cannot satisfy the samewants as the textbook.

This characteristic of satisfying a want is known

in economics as its utility (kegunaan).Utility, however, should not be confused with

usefulness kegunaan!.


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"or example, a submarine kapal selam! may or

may not be useful in time of peace, but it

satisfies a want. #any nations want submarines.$conomists say that utility determines %the

relationship between a consumer and a

commodity barang keperluan!&.Utility varies between different people and

between different nations. A vegetarian does not

want meat, but may rate the utility of bananasvery highly, while a meat'eater may prefer

steak.


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A mountain'republic like (wit)erland has little

interest in submarines, while maritime nations

rate them highly.

Utility varies not only in relation to individual

tastes and to geography, but also in relation to

time. *n wartime, the utility of bombs is high,and the utility of pianos is low. Utility is

therefore related to our decisions about

priorities in production + particularly in acentrally + planned economy. The production of

pianos falls sharply in wartime.


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The utility of a commodity is also related to the

uantity which is available to the consumer. *f

paper goods! is freely available, people will notbe so interested in buying too much of it. *f

there is an excess berlebihan! of paper, the

relative demand for paper will go down. -e cansay that the utility of a commodity therefore

decreases as the consumers stock persediaan!

of that commodity increases.


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*n economics, utility is a representation of

preferences kesukaan! over some set of goods

and services. /references have a utility

representation so long as they are complete, and

continuous.


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Utility is usually applied by economists in such

constructs as the indifference curve, which plot

the combination of commodities that anindividual or a society would accept to maintain

a given level of satisfaction. *ndividual utility

and social utility can be construed ditafsirkan!as the value of a utility function and a social

welfare function respectively masing'masing!.


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*n microeconomic theory, an indifference

curve is a graph showing different bundles

buntelan! of goods between which a consumeris indifferent (The uality or state of being

indifferent, or not making a difference).That is,

at each point on the curve, the consumer has nopreference for one bundle over another. One can

euivalently refer to each point on the

indifference curve as rendering memberikan!

the same level of utility satisfaction! for the

consumer.


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A graph of indifference curves for an individualconsumer associated with different utility levels

is called an indifference map. $ach point onthe curve represents the same elevationkenaikan!.

The higher you go the greater the level ofutility. The non'satiation puas! reuirementmeans that you will never reach the 0top,0 or a%bliss kebahagiaan! point&,


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The main use of indifference curves is in therepresentation of potentially observable demand

patterns for individual consumers overcommodity bundles.

*n finance, utility is applied to generate anindividual1s price for an asset called theindiffrence price. Utility functions are alsorelated to risk measures ukuran!.


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QUANTIFYING UTILITY


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It was recognized that utility (Desire or Want)could not be measured or observed directly,

so economists devised (merencanakan) away to infer (kesimpulan) relative utilitiesfrom observed choice. hese !revealed(memperlihatkan) preferences!, as they were

named by "aul #amuelson, were revealed inpeople's willingness (kesanggupan) topay: for the ful$lment or satisfaction of hisdesire


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REFERENCES

%lfred &arshall. '*. "rinciples of +conomics. %nintroductory olume. -th edition. ondon/&acmillan.

0onathan +. Ingersoll, 0r. heory of 1inancialDecision &aking. 2owman and ittle$eld, '-3. p.

'

0.4. 5erger, Statistical Decision Theory andBayesian Analysis. #pringer6erlag nd ed. ('-7)ch. .


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PRICE


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*n modern economies, prices are generallyexpressed in units of some form of currency.

"or commodities, they are expressed ascurrency per unit weight of the commodity, e.g.euros per kilogram.! /rices are sometimesuoted in terms of vouchers such as tradingstamps and air miles. *n some circumstances,cigarettes have been used as currency, forexample in prisons, in times of hyperinflation,

and in some places during -orld -ar 2.


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I81%I48

In economics, infationis a rise in thegeneral level of prices of goods andservices in an economy over a period

of time. When the general price levelrises, each unit of currency buys fewergoods and services. 9onse:uently,in;ation re;ects a reduction in the

purchasing power per unit of money


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*n economics, hyperinflatin occurs when a countryexperiences very high, accelerating cepat!, and

0unstoppable0 rates of inflation. *n such a condition,the general price level within an economy rapidlyincreases as the currency uickly loses real value.

3yperinflation is often associated with wars, aftermath,

sociopolitical upheavals pergolakan!, or other crisesthat make it difficult for the government to maintain thestatus uo keadaan yang tetap! can be a direct triggerof hyperinflation.


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In a black market economy, barter is alsorelatively common.

% black marketor underground economyis the market in which illegal goods aretraded. Due to the nature of the goods

traded, the market itself is forced to operateoutside the formal economy, supported bythe established state power.


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he black market is distinct from the greymarket, in which commodities are

distributed through channels which, whilelegal, are uno


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*n many financial tran!actin!, it is customarykebiasaan! to uote menyebut! prices in other

ways. The most obvious example is in pricing aloan, when the cost will be expressed as thepercentage rate of interest. The total amount ofinterest payable depends upon credit risk, theloan amount and the period of the loan. Otherexamples can be found in pricing financialassets.


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!R"CE #$E%R&


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+conomic theory asserts (menyatakan) thatin a free market economy the market pricere;ects interaction between supply anddemand / the price is set as to e:uate(menyamakan) the :uantity being suppliedand that being demanded. In turn(perubahan) these :uantities are determinedby the marginal utility of the asset todi>erent buyers and to di>erent sellers. Inreality, the price may be distorted (diganggu)by other factors, such as ta? and othergovernment regulations.


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In economics, the marginal utilityof a goodor service is the gain (or loss) from an increase(or decrease) in the consumption of that goodor service. +conomists sometimes speak of alaw o diminising marginal utility,meaning that the $rst unit of consumption of agood or service yields (hasil) more utility thanthe second and subse:uent (berikutnya) units,with a continuing reduction for greateramounts. he marginal decision rulestatesthat a good or service should be consumed ata :uantity at which the marginal utility ise:ual to the marginal cost.


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"hen a cmmdity i! fr !ale at multiple lcatin!#the la$ f ne price i! %enerally &elieved t hld'This essentially states that the cost difference betweenthe locations cannot be greater than shippingexpedition!, taxes, other distribution costs etc. *n thecase of the ma4ority of consumer goods and services,distribution costs are uite a high proportion of theoverall price, so the la$ may nt &e very u!eful' *n

practice it may well make economic sense to offer aproduct or service for sale at a higher price in a wealthyarea than in a deprived kekurangan! area.


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he law o one price is an economic lawstated as/ @In an e


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!R"CE *N+ ,*-.E


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The paradox of value was observed and debated byclassical economists. Adam (mith described what isnow called the diamond water paradox5 diamondscommand a higher price than water, yet water isessential for life and diamonds are merely hanya!ornamentation hiasan!. Use value was supposed togive some measure of usefulness, later refineddiperhalus! as marginal benefit which is marginalutility counted in common units of value! whileexchange value was the measure of how much onegood was in terms diistilahkan6disamakan! of another,namely what is now called relative price .


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!R"CE *S !R%+.C#",E $./*N-*0%.R #"/E


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#arxists assert menyatakan! that value derivesberasal! from the volume of socially necessary labour

time exerted menggunakan! in the creation of anob4ect.

*n fact, he admonished menegur! the other classicalpolitical economists like 7icardo and (mith! for trying

to make this proof. 7ather, for #arx, price euals thecost of production capital'cost and labor'costs! plusthe average rate of profit. (o if the average rate of

profit return on capital investment! is 228 then prices

would reflect cost'of'production plus 228.


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C%NF.S"%N 0E#1EEN !R"CES *N+C%S#S %F !R%+.C#"%N


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/rice is commonly confused with the notion of cost ofproduction, as in %* paid a high cost for buying my newtelevision&9 but technically these are different concepts./rice is what a buyer pays to acuire memperoleh!

products from a seller. Cost of production concerns thesellers investment e.g., manufacturing expense! in the

product being exchanged ditukar! with a buyer. "ormarketing organi)ations seeking to make a profit, thehope is that price will exceed melampaui! cost of

production so that the organi)ation can see financialgain keuntungan! from the transaction.


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"inally, while pricing is a topic central to a company1sprofitability, pricing decisions are not limited to for'profit companies. The behavior of non'profit

organi)ations, such as charities can be described assetting prices. "or instance, charities seeking to raisemoney may set different %target& levels for donationsthat reward donors with increases in status e.g., name

in newsletter!, gifts or other benefits. These targets canbe seen as prices if they are interpreted tafsirkan! asspecifying a cost that must be paid by buyers donors!in order to obtain memperoleh! something of value.


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!R"CE !%"N#


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he price of an item is also called the Apricepoint@, especially where it refers to stores

that set a limited number of price points. 1ore?ample, Dollar Beneral is a general storestore that sets price points only at evenamounts, such as e?actly one, two, three,

$ve, or ten dollars. 4ther stores will have apolicy of setting most of their prices ending in cents or pence.


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4ther stores (such as dollar stores, poundstores, euro stores, '**6yen stores, and soforth) only have a single price point (C', ','E, F'**), though in some cases this pricemay purchase more than one of some verysmall items. "rice is relatively less than thecost price.


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REFERENCE

&ilton 1riedman, Price Theory.Beorge #tigler,Theory of Price.

#imon 9larke, Marx, marginalism, andmodern sociology: from Adam Smith to Max

Weber (ondon/ he &acmillan "ress, td,'-).

&akoto Itoh G 9ostas apavitsas, PoliticalEconomy of Money and Finance.

"ierre ilar,A history of gold and money.


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"aul H. Walgenbach, 8orman +. Dittrich and+rnest I. Hanson, ('3), 1inancial

%ccounting, 8ew Jork/ Harcourt 5race0avonovich, Inc. "age K.

%rthur 4L#ullivan, #teven &. #he>rin (**).

Economics: Princiles in action. Mpper #addle2iver, 8ew 0ersey *3K7-/ "earson "renticeHall. pp. K', K*K.

utility and price materi

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