Whydo consumers seek to maximize their utility? Is marginal utility moreuseful than total utility in the decision making of consumers? Why orwhy not? Is marginal utility per dollar spent a more accurate viewthan marginal or total utility? Why or why not?
Consumersmaximize their utility because they are concerned with achieving thehighest level of satisfaction from the consumption of goods orservices with the available budgets. According to the rationalitytheory in economics, it is rational for people to choose what is bestfor them always, so they should buy the most satisfying goods orservices (Stull, 2014). Naturally, people buy what has more benefitsthan harm. Utility maximization theory also suggests that peopleprefer more to less. The concept of scarcity and choice also explainswhy people prefer more to less. There are unlimited wants and needsfor people against scarcity of resources. Therefore, people maximizeutility in order to achieve the highest number of wants using theleast amount of resources because the wants are unlimited and theresources are scarce.
Marginalutility is more useful than the total utility in decision making ofconsumers because it measures the additional utility obtained forevery single unit of commodity consumed (Cipu and Gheorghe, 2015).Therefore, marginal utility tells the consumer the additional amountof goods he or she needs before he or she becomes satisfied. On theother hand, total utility does not show specifically how much aconsumer should consume before achieving maximum utility consideringthe resources used to get that utility (Tengstam, 2014). In otherwords, it is easier to determine maximum utility using marginalutility rather than total utility. Marginal utility per dollar ismore accurate than marginal utility or total utility because it showsthe change in utility for every dollar spent, so the consumer is ableto utilize his money or resources effectively.
Cipu,C., and Gheorghe, C. (2015). Some Applications in Economy for UtilityFunctions Involving Risk Theory.Economics and Finance,22, 595–600.
Stull,W.J. (2014). Taking the Plunge: Teaching the Microeconomics ofEntrepreneurship. InternationalAdvances in Economic Research, 20(2)139-150.
Tengstam,S. (2014). Disability and marginal utility of income: Evidence fromhypothetical choices. HealthEconomics (United Kingdom), 23(3),268-282.