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In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings. In a normative context, utility refers to a goal or objective that we wish to maximize, i.e., an objective function.
In expenditure minimisation the utility level is given and well as the prices of goods, the role of the consumer is to find a minimum level of expenditure required to reach this utility level. The utilitarian social choice rule is a rule that says that society should choose the alternative that maximizes the sum of utilities.
Utility is an economic concept that refers to the level of satisfaction or benefit that individuals derive from consuming a particular good or service, which is quantified using units known as utils (derived from the Spanish word for useful). However, determining the exact level of utility that a consumer experiences can be a challenging and ...
A single-attribute utility function maps the amount of money a person has (or gains), to a number representing the subjective satisfaction he derives from it. The motivation to define a utility function comes from the St. Petersburg paradox: the observation that people are not willing to pay much for a lottery, even if its expected monetary gain is infinite.
In economics, a cardinal utility expresses not only which of two outcomes is preferred, but also the intensity of preferences, i.e. how much better or worse one outcome is compared to another. [ 1 ] In consumer choice theory , economists originally attempted to replace cardinal utility with the apparently weaker concept of ordinal utility .
In welfare economics and social choice theory, a social welfare function—also called a social ordering, ranking, utility, or choice function—is a function that ranks a set of social states by their desirability.
Marginalism is a theory of economics that attempts to explain the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility. It states that the reason why the price of diamonds is higher than that of water, for example, owes to the greater additional satisfaction of the diamonds over the water.
In economics, an ordinal utility function is a function representing the preferences of an agent on an ordinal scale. Ordinal utility theory claims that it is only meaningful to ask which option is better than the other, but it is meaningless to ask how much better it is or how good it is.