The concept of utility was originally conceived by the English philosopher Jeremy Bentham in the early 1800s as a way of evaluating how well a society was governed.

If it makes you uncomfortable to consider a utility function of only two goods, you can think of the good on the vertical axis as a “bundle of all other goods” with a price equal to the index of …

Individual choices are primitive data that economists can observe. Choices are taken to reveal individual’s preferences. Utility is a convenient mathematical construction for modeling choices …

Characterize the Demand Function This topic for background reading only. Suppose that is complete, transitive, strongly monotonic, strictly convex and can be represented by a twice …

In Section 1 we analyse how the agent chooses among a number of competing alternatives, investigating when preferences can be represented by a utility function. In Section 2 we …

Is utility ordinal or cardinal? Utility is an ordinal concept: the precise magnitude of the number that the function assigns has no significance.

ility or satisfaction from consumption of commodities. The extent of satisfaction can be estimated by a utility function, which gives an ordinal value to. the consumption of a particular bundle of …