Economists describe “utility” as the satisfaction gained from obtaining a good o

Question

Economists describe “utility” as the satisfaction gained from obtaining a good or undertaking an activity.

A. How have economists traditionally evaluated what choices give individuals the highest level of utility? Base your answer on the text and/or required articles. Be sure to include the title(s) of the articles.

B. How good are people at anticipating what choices will provide them with the highest level of utility? Base your answer on the required articles. Be sure to include the title(s) of the articles.

Explanation / Answer

We buy goods and services because they provide us with satisfaction, we feel better off because we have purchased them. Economists call this satisfaction utility. The term utility is used to describe the pleasure or satisfaction that a consumer obtains from his or her consumption of goods and services. Utility is a subjective measure of pleasure or satisfaction that varies from individual to individual according to each individual's preferences. It is not possible to measure utility, nor it is possible to claim that one individual's utility is higher than another's. Utility has no Ethical or Moral Significance. It cannot be measured objectively. It depends on the intensity of want. There are four different types of utility. They are: Form, Place, Time, Sevice.

Utility are of three kinds:

Marginal Utility - It is the utility derived from the last or marginal unit of consumption.

Total Utility - It is the utility from all units of consumption.

Average Utility - It is the utility in which the total unit of consumption of goods is divided by number of Total Units.

When making a purchase decision, a consumer attempts to get the greatest value possible from expenditure of least amount of money. His or her objective is to maximize the total value derived from the available money. The Utility Maximization rule states that consumers decide to allocate their money incomes so that the last money spent on each product purchased yields the same amount of extra marginal utility. As the income increases, total utility also increases. Therefore, higher income groups in our society usually enjoys more products and have higher total utility levels.

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