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The process or goal of obtaining the highest level of utility from the consumption of goods or services. The goal of maximizing utility is a key assumption underlying consumer behavior studied in consumer demand theory. Consumers are assumed to make choices, especially concerning the purchase of goods, such that they obtain the highest possible level of satisfaction. Utility maximization can be achieved at the peak of the total utility curve. Utility maximization is the guiding notion underlying consumer choices analyzed with consumer demand theory and utility analysis. It makes sense to think that people are generally motivated to do what is best for them, to purchase the most satisfying goods, to make the decisions that do more good than harm, to improve their overall living standards and well-being, that is, to maximize their utility. Working through the logical consequences of this assumption, when combined with other principles of consumer behavior especially the law of diminishing marginal utility, makes it possible to gain insight into such things market demand and the law of demand.
Utility Analysis
Roller Coaster Utility
The accompanying table can be used to illustrate utility maximization. The numbers indicate the total utility obtained by Edgar Millbottom while riding the Monster Loop Death Plunge roller coaster at the Shady Valley Amusement Park. The righthand column is the accumulated satisfaction Edgar receives from riding the Monster Loop Death Plunge roller coaster 8 times during his day at the amusement park. The numbers indicate that Edgar receives the greatest total utility, 36 utils, by riding the Monster Loop Death Plunge roller coaster 6 times. Click the [Utility Max] button to highlight this quantity. Taking 5 trips around the Monster Loop Death Plunge roller coaster track generates only 35 utils. Likewise, 7 rides generate only 35 utils. Maximum utility comes from 6 rides and only 6 rides. Anything else comes in less.
While Duncan might buy a freshly prepared Hot Momma Fudge Bananarama Ice Cream Sundae because it just "sounds tasty," what he is really trying to do is to raise his utility level to its maximum. He is motivated to eat the hot fudge sundae because it adds more to his utility total. And if he can add to his utility total, then he is not AT the maximum.