Microeconomics: Theory and Applications with Calculus, 4e

3.2 Utility

Underlying our model of consumer behavior is the belief that consumers can compare various bundles of goods and decide which bundle gives them the greatest pleasure. We can summarize a consumer’s preferences by assigning a numerical value to each possible bundle to reflect the consumer’s relative ranking of these bundles.

Following the terminology of Jeremy Bentham, John Stuart Mill, and other nineteenth-century British utilitarian economist-philosophers, economists apply the term utility to this set of numerical values that reflect the relative rankings of various bundles of goods.

Utility Function

The utility function is the relationship between utility measures and every possible bundle of goods. If we know the utility function, ...