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Utility, in economics, is the ability of the good or service to fill the wants or needs of the consumer and the ability to hold preference over other goods or services. Utility is essentially a quantitative measure for the level of satisfaction or enjoyment received my a consumer in consuming a specific good or service. Utility is used to determine how much a consumer will be willing to pay for a good or service and what combination of goods or services will provide the highest amount of satisfaction. 

When assessing economic utility, the greater the utility number, the greater the satisfaction that the consumer received from the good. It is also important to recognize that utility numbers cannot be used to make calculations because they are not concrete numbers. Economics separates utility theory into cardinal utility and ordinal utility, where ordinal follows the idea that a good or service cannot be measured in numerical terms and cardinal utility theory sees differences in utility as quantitative differences in behaviour.

Note that utility theory functions on the assumption that individual consumers have a consistent set of preferences that remain unchanged for the period of time measured. Utility is usually presented in an indifference curve, which plots the different amounts of combinations of goods and services that would maintain an equal level of satisfaction for the consumer.

Total & Marginal Utility

Complete the following table and answer the questions below: Units Consumed Total Utility Marginal Utility 0 0 . 1 10 10 2 . 8 3 25

Walras General Equilibrium Model

1. Critically appraise the role of the Auctioneer in Walras' presentation of general equilibrium. 2. Critically appraise Walrasian general equilibrium theory. 3. Distinguish clearly between Walras' Law and Say's Law. 4. Distinguish between partial and general equilibrium. 5. Explain the role of the numéraire in a

Economics in Healthcare

Please be original and not copied response! What is the relationship between quality, consumption and demand for health care services? What are the key components in the costs of health care services?

Calculate the expected value and expected utility of the given projects.

An individual is considering two investment projects. Project A will return a zero profit if conditions are poor, a profit of $4 if conditions are good, and a profit of $8 if conditions are excellent. Project B will return a profit of $2 if conditions are poor. a profit of $3 if conditions are good, and a profit of $4 if conditi

Calculating Consumption and Measuring Relative Risk Aversion

Please answer and show work. 1. Calculate the change in consumption of goods x and y for a person with utility U(x,y)= 8(x)^0.6(y)^0.3 and income of $270 facing px = $2 and py = $3 when a tax of $1 per unit is added to the price of x. Decompose the change in consumption of x into Hicks income and substitution effects. Fin

Find the optimal bundles of consumption.

Assume that an individual consumes two goods, X and Y. The total utility of each good is independent of the rate of consumption of the other good. The price of X and Y are $40 and $60 respectively. Use the following table of total utilities to answer the following questions. Good Total Utility of X Total Utility of Y 1

Demand: Utility and Marginality

1. The demand for factors of production or resources is called a derived demand. Explain the reasoning behind this terminology. What are the determinants that lie behind the demand for factors? 2. Suppose you were the economic adviser to the president of a small underdeveloped country. What advice would you give him or her wi

Usual Utility Maximization

In the context of usual utility maximization problems involving two goods, prove that: a) All goods must have one net substitute. b) An inferior good must have at least one gross substitute.

Consumer Choice, Individual and Market Demand Activity

The table below shows the maximum amount of money you would be willing to pay for increasing numbers of chicken pieces at Fastfood: Chicken Pieces Maximum Payment 1 $2.00 2 3.80 3 5.40 4 6.80 5 8.00 6 9.00 7 9.80 8 10.40 9 10.80 10 11.00 11 11.00 a) Find the marginal utility for each chicken pi

Diminishing Marginal Utility in a Workplace

In the workplace you will often see diminishing marginal utility, where the utility (satisfaction experienced per hour of work) experienced by workers drops as they perform their jobs over time. As a manager, what are some practical things you could do to raise utility for employees that also benefit the firm? In your answer us

Finding the optimal consumption bundle

Two consumers, Mamoon and Kader, consume only two goods, good 1 and good 2, with the quantities of each consumed denoted by x1 and x2 respectively. The price of x1 is $6/unit, and the price of x2 is $5/unit. The consumer has a fixed income of $64. Mamoon has a utility function: U(x1,x2 )=2x1^3 x2^5? Kader's utility function

Utility Functions

Attached are 2 utility functions that I'm having trouble with. Problem 3 For each of the following utility functions, draw indifference curves for utility level 12 and 16. Indicate three bundles on each of these indifference curves by specifying the coordinates of each bundle. Shade the weakly preferred set of bundles you

Utility Problems

** Please see the attached file for the complete problem description ** Can you help me with this task? Consider the following utility functions: (please see the attached file) a) Explain what the relationship between a utility function and preference is. b) What types of preferences (please see the attached file), (plea

Utility from Income & Insurance

A person derives utility from income, and assume that the utility function is U=Y0.5. Assume a person has annual income of $40,000 but in any given year there is a 10% chance the person's car will be damaged requiring a repair of $17,500. a. Provide an equation that describes expected utility in this instance and provide a

The amount of utility

In terms of the consumer theory set forth in this chapter, can you explain the meaning of the following statements? a. "I think you get more for your money from Nike than from Reebok." b. "I wanted to buy a Boxster rather than a Malibu, but it just wasn't worth it." c. "I'd like to go to Mexico over spring break, but I just can'


If the consumer is rational, how can utility affect their economic decisions? Does utility lead to more or less customer satisfaction?

Economics: Sunk Costs and Utility

1. People join tennis clubs for a fixed fee per year, which entitles them to play as much as they want without charge. Because people who pay these fees play more tennis than others (who can use free public courts), this means sunk costs matter for decisions. True or False? 2. When discussing the maximization of utility, reg

Lolita, an intelligent and charming Holstein cow, consumes only two goods, cow feed (made of ground corn and oats) and hay. Her preferences are represented by the utility function U(x, y) = x?x2/2+y, where x is her consumption of cow feed and y is her consumption of hay. Lolita has been instructed in the mysteries of budgets and optimization and always maximizes her utility subject to her budget constraint. Lolita has an income of $m that she is allowed to spend as she wishes on cow feed and hay. The price of hay is always $1, and the price of cow feed will be denoted by p, where 0 < p ? 1. (a) Write Lolita's inverse demand function for cow feed. (b) If the price of cow feed is p and her income is m, how much hay does Lolita choose? (c) Plug these numbers into her utility function to find out the utility level that she enjoys at this price and this income. (d) Suppose that Lolita's daily income is $3 and that the price of feed is $.50. What bundle does she buy? What bundle would she buy if the price of cow feed rose to $1? 2. F. Flintstone has quasi-linear preferences and his inverse demand function for Brontosaurus Burgers is P(b) = 30 ? 2b. Mr. Flintstone is currently consuming 10 burgers at a price of 10 dollars. (a) How much money would he be willing to pay to have this amount rather than no burgers at all? What is his level of (net) consumer's surplus? (b) The town of Bedrock, the only supplier of Brontosaurus Burgers, decides to raise the price from $10 a burger to $14 a burger. What is Mr. Flintstone's change in consumer's surplus?

Lolita, an intelligent and charming Holstein cow, consumes only two goods, cow feed (made of ground corn and oats) and hay. Her preferences are represented by the utility function U(x, y) = x?x2/2+y, where x is her consumption of cow feed and y is her consumption of hay. Lolita has been instructed in the mysteries of bud

Maximizing Consumer Utility Under a Budget Constraint

Let M(U)a = z = 10 - x and M(U)b = z = 21 - 2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $10 to spend on A and B -- that is, x + y = 10. How is the $10 best allocated between A and B? How much utilit

Find the optimal utility of a household by two different methods.

A household's utility over two consumption goods x and y is U= U(x,y) = xy. 1. Describe the household's indifference curve for U = 1 for values of x and y less than 3 (ie. the curve containing all combinations of x and y such that U(x,y)=1. Now assume that the household's wealth is w=4 and that the prices of the goods are

Maximize a consumer's utility within his budget.

For this problem, assume that Joe has $80 to spend on books and movies each month and that both goods must be purchased whole (no fractional units). Movies cost $8 each and books cost $20 each. Joe's preferences for movies and books are summarized by the following information: MOVIES

Managerial Economics - Utility maximization

Bridget has a limited income and consumes only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle, and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget's utility, while the last pound of cheese added 40 units.

Give at least 2 examples of situations when you use utility to make decisions

1. Give at least 2 examples of situations when you use utility to make decisions. For each example give at least 2 parameters that would affect your decision. For example, when purchasing a home you may have to decide between the one with the larger kitchen or the one with the larger closets. Or when purchasing an automobile

Marginal Utility a) Given that Bill can consume only 167 grams of carbohydrates daily, how many cups of each food will he consume daily? Show your work. b) Suppose Bill's doctor tells him to further reduce his carbohydrate intake to 126 grams per day. What combination will he consume?

Need help please! And please give me an interpretation or explanation of the problem so I can understand. Thanks. Suppose Bill is on a low-carbohydrate diet. He can eat only three foods: Rice Krispies, cottage cheese, and popcorn. The marginal utilities for each food are tabulated below. Bill is allowed only 167 grams of carb

economists' model of individual choice

Using the economists' model of individual choice (comparing the marginal costs and marginal benefits of a choice, incorporating the level of satisfaction or "utility" we derive from the choice, and considering the relative MU/P of a good we buy to that of another), choose, and explain your motivation for four personal decisions

Price change and substitution vs income effect; the principle of diminishing marginal utility explained; and the relationship between the ratio of marginal utility and the price of each good consumed in consumer equilibrium.

1) Explain how a price change is affected by (a) the substitution effect, (b) the income effect. 2) If someone is very thirsty and drinks five glasses of water, explain how the principle of the diminishing marginal utility is related to drinking each glass of water. 3) Explain the relationship between the ratio of marginal

Health insurance

1. Joe is currently unemployed and without health insurance coverage. He derives utility (U) from his interest income on his savings (Y) according to the following function: U = 5(Y1/2) Joe presently makes about $40,000 of interest income per year. He realizes that there is about a 5 percent probability that he may suffer