Accordingto Moyer (2010), a rational consumer will always seek to maximizehis/her utility. The reason why consumers tend to maximize theirutility is because they always desire to have what is best for themand their lives with the incomes at their disposal. In other words,consumers tend to maximize their utility in search for happiness(Moyer,2010).It is the desire of a consumer to purchase a basket that will makehim/her happy as he/she fulfills his/her satisfaction.
Marginalutility and total utility are important concepts to a consumer, but Ithink marginal utility is more important than total utility whenconsumers are making spending decisions. This is because marginalutility helps a consumer in understanding the satisfaction he/shewould receive by consuming an extra unit of a commodity (Petar,2010).In case a consumer would get a decreasing satisfaction in consumingadditional units, then there is no need of purchasing more units of acommodity. Thus, marginal utility is critical for a consumer inmaking decisions. Marginal utility per dollar spent is a criticalaspect when establishing whether a consumer has maximized his/herutility (Arnold,2015).Therefore, marginal utility per dollar spent can be perceived as amore accurate view compared to total utility and marginal utility.
Theintersection of the budget lines and the indifference curves providea valid means of assessing consumer behavior. This is because theintersection of a budget line and an indifference curve (where thebudget line is in tangent to an indifference curve) indicates themaximum satisfaction that can be obtained by using the budget that aconsumer has (Sotelo & Block, 2014). Since a consumer has thebehavior of consuming goods depending on the available income, theintersection of the budget lines and indifference curves can beperceived as a valid means of assessing the consumer behavior.
Theanalysis of this topic applies to making of business decisions since,as a business person, one can be in a position to understand thebehavior of consumers that can help him/her in making businessdecisions such as the units of commodities to keep in business. Forexample, a business man would tend to keep more commodities as wellas expensive ones in locations where consumers have a lot of incomes.
Arnold,A.R. (2015). Economics. New York: Cengage Learning.
Moyer,B. (2010). Maximizing Utility. ElectronicEngineering Journal.
Petar,F. (2010). The Legitimacy of Increasing Marginal Utility in SocialServices-The case of University Examinations. Economic Annals, Vol.LV (186).
Sotelo,A.M.J. & Block, E.W. (2014). IndifferenceCurve Analysis: The Correct and the Incorrect. OeconomiaCopernicana,Vol. 5 (4).