Here is an elaborated discussion on the utility function, highlighting:- 1. Meaning of the Utility Function 2. Constructing a Utility Function 3. Some Very Common Utility Functions. Meaning of the Utility Function: A utility function is a way of assigning a number to each possible consumption bundle such that larger numbers are assigned to more-preferred […]
Utility Function: Meaning and Construction | Microeconomics
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Marginal Utility and MRS (With Equation) | Microeconomics
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The term ‘marginal utility’ refers to the change in total utility associated with a small (marginal) change in the consumption of one commodity (x1), the consumption of the other commodity remaining constant (at say, x̅2). The rate of change of total utility of x1 associated with a small change in the amount of good 1(dx1) […]
Cardinal Utility Approach and Its Irrelevance | Microeconomics
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In the cardinal utility approach, presented by Alfred Marshall, the size of the utility difference between two bundles of goods carries some significance. In other words, this approach attaches a significance to the magnitude of utility. There is a very simple way of assigning an ordinal utility to the two bundles of goods- we just […]