The utility in a commodity can be created in the following ways:
(i) Place Utility (Creation of utility by change of place):
The utility of an item or commodity can be improved by simply changing its place or the site. The transportation of goods from the place where these are available at lower prices, to the places where prices of these items are higher, creates a place utility.
For example, the wood available in forests becomes useful to the society, when it is brought to the city or market. By this process of change of places the utility (or say value) of wood is created or increased.
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(ii) Form Utility (Creation of utility by change of shape):
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It is a universal law that matter can neither be created nor destroyed, but it can be transformed into various forms. This transformation, by changing ‘shape’, ‘size’, ‘design’ or ‘form’ of the commodity adds to it utility because by changing the shape or form, that particular commodity becomes more useful.
Such types of activities are inherent in all manufacturing industries. For example, wood becomes more useful when it is converted into furniture and utility of cotton is increased.
(iii) Time Utility (Creation of utility by storing the commodity):
On many occasions, the utility of commodities greatly increase, on being stored for a certain period. The fruits and vegetables are stored in cold storage so that they can be sold for consumption during the off season. This adds value to these items, since ‘time’ is the main factor to increase the utility of the commodity.
(iv) Service Utility (Creation of utility by satisfying human wants):
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Service utility is created in rendering personal services to the customers by various professionals. By repairing the TV sets, a TV mechanic makes it more useful for its owners. Similarly, a teacher teaching in a classroom, a tailor stitching a shirt etc. is several instances of service utility.
(v) Possession Utility:
If the change of possession of a commodity increases its utility, it is termed as possession utility. The utility of needles is not so great for dealers as it is for the household’s tailors etc. The utility of needles increases by the change of possession.
(vi) Knowledge Utility:
When the utility of a commodity increases by increasing the people’s knowledge, it is called the knowledge utility; for instance we come to know about the qualities of Lux soap, Toothpastes etc., from their advertisement. Thus an advertiser also helps by creating knowledge utility.