Utility in the Context of Microeconomics
Utility in the Context of Microeconomics. Write a 1500 word paper answering; Some scholars even say that economics is one of the most successful social sciences because of its ability to express different factors in different manners.
Economics focuses on satisfying unlimited human wants by allocating scarce resources (“Economics Basics: Utility”). So basically, what economics aims to do is to achieve an efficient allocation of resources. The concept of utility in Microeconomics can explain how humans can attain satisfaction given limited or scarce resources. What makes utility interesting is that, as said earlier, it tries to quantify the satisfaction that consumers get from a certain combination of goods or services. Utility, in the context of economics, is assumed to be measurable. This is probably the “magic” of economics. People, without having the knowledge of utility, would just measure their satisfaction by being satisfied or not satisfied. But in Microeconomics, measuring utility does not have to be this binary. It gives us options on how to measure one’s satisfaction.
This paper will try to discuss the underlying concepts and theories behind utility. The paper will include how consumers can maximize their utility given a budget constraint. In order to discuss all of these, topics like consumer choice, indifference curves, and income and substitution effects will be introduced.
People consume goods in order to get pleasure or satisfaction. Utility represents the level of satisfaction that the consumer derives from a particular market basket. The term utility was coined by an English philosopher named Jeremy Bentham. Since then, the term was used to pertain to satisfaction, preference, pleasure, happiness, and their other equivalents (Dolan and Lindsey 544). The utility can be measured in different manners. It can either be cardinal or ordinal.
The measures of utility can be cardinal or ordinal. Cardinal utility is said to be a measurable quantity. .