ECON 200 Lecture Notes - Lecture 10: Marginal Utility, Revealed Preference, Utility
11 Oct 2018
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Utility is a measure of the amount of satisfaction a person derives from something. (cid:12254) incorporates emotions and sensations. (cid:12254) universal measure (or yardstick) that allows individuals to compare choices. (cid:12254) not typically comparable across individuals. How can anything meaningful be said about the utility people experience? (cid:12254) observe what people actually do. The principle of revealed preference is that people"s preferences can be determined by observing their choices and behavior. The principle of revealed preferences isn"t feasible for analyzing how people make choices. Utility functions aid in systematically analyzing choices. (cid:12254) a utility function is a formula for calculating the total utility that a particular person derives from consuming a combination of goods and services (called a bundle of commodity). For example, suppose sarah receives a utility of 3 for each serving of mac-n-cheese she eats, 2 for broccoli, and 8 for ice cream.
