The Utility function is the relationship between an individual's utility and consumption bundle.
What is Utility function?
- Utility in economics refers to the pleasure or happiness that consumers derive from using a good or service. Consumer preferences for a variety of goods and services are gauged by the utility function.
- The Spanish term for helpful, util, is used to quantify utility, although it is abstract and challenging to calculate the benefit or satisfaction that consumers experience.
- Therefore, by watching customer decisions, economists gauge utility in terms of disclosed preferences. From there, economists arrange consumption baskets in descending order of preference.
The utility function calculates a consumer's wellbeing or happiness in relation to the consumption of tangible commodities like food and clothing. In rational choice theory, utility function is frequently used to examine behavioral patterns in people.
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