utility and preferences

Utility represents the satisfaction or happiness a person gains from consuming goods or services. Preferences refer to an individual's ranking or ordering of different options based on the level of utility they provide. Essentially, preferences help determine which choices someone prefers when faced with alternatives, guiding their decision-making. For example, if you prefer coffee over tea, your preferences indicate higher utility from coffee. Together, utility and preferences help economists understand and predict how people make choices to maximize their happiness within their available resources.