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Utility Function

A utility function is a mathematical representation used in economics to measure the satisfaction or happiness that an individual receives from consuming goods or services. It assigns numerical values to different combinations of goods and services based on an individual's preferences, with higher numbers indicating greater satisfaction. Utility functions are used to analyze consumer behavior and optimize decision-making in economic models.

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230 views2 pages

Utility Function

A utility function is a mathematical representation used in economics to measure the satisfaction or happiness that an individual receives from consuming goods or services. It assigns numerical values to different combinations of goods and services based on an individual's preferences, with higher numbers indicating greater satisfaction. Utility functions are used to analyze consumer behavior and optimize decision-making in economic models.

Uploaded by

fahad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

UTILITY FUNCTION

A utility function
is a mathematical representation
used in economics to measure the satisfaction
or
happiness
that an individual receives from consuming
goods or services.
It assigns a numerical value to different
combinations of goods and services based on
an individual's preferences and desires.

The utility function typically takes the form U(X,


Y, Z, ...), where X, Y, Z, etc. represent different
goods or services,
And
U represents the utility or satisfaction obtained
from consuming those goods or services.
The function is designed to capture the relative
preferences of an individual, with higher values
indicating greater satisfaction.
Utility functions can vary greatly among
individuals, as people have different preferences
and priorities.
They can also change over time as people's
tastes and circumstances evolve.
Utility functions are used in economics to
analyze consumer behavior, make predictions
about consumer choices, and optimize decision-
making in various economic models

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