A utility function is:
A) an equation for calculating the most utility a particular person can derive.
B) an equation for calculating the total utility that a particular person derives from consuming a particular good over a particular time period.
C) an equation for calculating the total utility that a group of people derive from consuming a particular good.
D) an equation for calculating the total utility that a particular person derives from consuming a particular combination of goods and services.

Question

Quizplus · Accepted Answer

A utility function is an equation that represents the total utility that a person derives from consuming a particular combination of goods and services. It allows economists to analyze the choices that individuals make based on their preferences and constraints, and to predict how changes in prices or income will affect their consumption patterns. Option A is incorrect because utility functions are not designed to calculate the maximum utility that a particular person can derive, but rather to describe the relationship between consumption and utility. Option B is incorrect because it only applies to one good, not a combination of goods, and it does not represent a person's preferences or choices. Option C is incorrect because utility functions are typically used to represent individual, not group, preferences.

A Utility Function Is