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In microeconomics, the utility maximization problem is the problem consumers face: "How should I spend my money in order to maximize my utility?" It is a type of optimal decision problem . It consists of choosing how much of each available good or service to consume, taking into account a constraint on total spending (income), the prices of the ...
The main problem for total utilitarianism is the "mere addition paradox", which argues that a likely outcome of following total utilitarianism is a future where there is a large number of people with very low utility values. Parfit terms this "the repugnant conclusion", believing it to be intuitively undesirable. [4]
The utility functions may represent their chance of recovery – () is the probability of agent to recover by getting doses of the medication. The utilitarian rule then allocates the medication in a way that maximizes the expected number of survivors.
According to Derek Parfit, using total happiness falls victim to the repugnant conclusion, whereby large numbers of people with very low but non-negative utility values can be seen as a better goal than a population of a less extreme size living in comfort. In other words, according to the theory, it is a moral good to breed more people on the ...
The expected utility hypothesis is a foundational assumption in mathematical economics concerning decision making under uncertainty. It postulates that rational agents maximize utility, meaning the subjective desirability of their actions. Rational choice theory, a cornerstone of microeconomics, builds this postulate to model aggregate social ...
The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves.It analyzes how consumers maximize the desirability of their consumption (as measured by their preferences subject to limitations on their expenditures), by maximizing utility subject to a consumer budget constraint. [1]
This important result tells us that utility is maximized when the consumer's budget is allocated so that the marginal utility per unit of money spent is equal for each good. If this equality did not hold, the consumer could increase his/her utility by cutting spending on the good with lower marginal utility per unit of money and increase ...
The marginal utility, or the change in subjective value above the existing level, diminishes as gains increase. [17] As the rate of commodity acquisition increases, the marginal utility decreases. If commodity consumption continues to rise, the marginal utility will eventually reach zero, and the total utility will be at its maximum.