utility function
A utility function is a concept used in economics and decision-making that represents how individuals or groups prioritize and derive satisfaction from different choices or goods. Essentially, it measures the happiness or satisfaction gained from consuming certain products or services. Each person's utility function is unique, reflecting their preferences and values. For example, if someone values comfort over style in clothing, their utility function will show a higher satisfaction from comfortable clothes even if they are less stylish. This helps economists understand consumer behavior and predict how choices are made, influencing market trends and policies.
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A utility function is a concept in economics that represents how individuals prioritize their preferences and make choices. It assigns a numerical value to different outcomes based on personal satisfaction or happiness. For instance, if you prefer ice cream over cake, the utility function might give ice cream a higher score, indicating you derive more pleasure from it. This helps economists understand decision-making by quantifying the benefits an individual gets from various options, ultimately guiding choices in spending, consumption, and resource allocation.