Two very important concepts mentioned in this chapter are budget constraints and
ID: 2440791 • Letter: T
Question
Two very important concepts mentioned in this chapter are budget constraints and the allocation of income to maximize utility. These are problems that all of us face on a continuing basis. For example, we may be hungry for pizza so we go to a pizza parlor and have pizza. Maximum utility. But then one of our friends calls and want to go for pizza so we go again for pizza. We still allocate income but the utility is less. So is it worth it? Discuss here times when you have experienced a situation as I described above (maybe not with pizza). Be sure to discuss the situation(s) and the utility involved. Include your budget constraints and how you most often intend to allocate your income resources with those constraints. And, of course, include the actual "interferences" to your budget goals.Two very important concepts mentioned in this chapter are budget constraints and the allocation of income to maximize utility. These are problems that all of us face on a continuing basis. For example, we may be hungry for pizza so we go to a pizza parlor and have pizza. Maximum utility. But then one of our friends calls and want to go for pizza so we go again for pizza. We still allocate income but the utility is less. So is it worth it? Discuss here times when you have experienced a situation as I described above (maybe not with pizza). Be sure to discuss the situation(s) and the utility involved. Include your budget constraints and how you most often intend to allocate your income resources with those constraints. And, of course, include the actual "interferences" to your budget goals.
Explanation / Answer
Economists use the term utility as a measure of satisfaction, joy or happiness. How much satisfaction does a person gain from eating pizza or watching movie. Our attempts to get the greatest value possible from expenditure least amount of money
I experienced a situation as you describe above. I got chocolates for my nephew on his birthday and asked him that, So you think the secret of your happiness lies in chocolate? He replied Yeah! okay! Here is a chocolate. Tell me if it makes you happy
After two more chocolate, as I expected his excitement for the chocolate dwindled and he didn't look interested in fifth chocolate as much as he wanted the first one .
I started telling him,it means happiness is not in chocolate, he replied No. It's not in all chocolate. Happiness is in first four chocolate. I spent my money on fifth chocolate its not worth.
The first unit on consumption for any product is typically highest, with every unit of consumption to fallow holding less and less utility in all cases where I couldn't find maximum utility I should avoid to spend my money and I often try to allocate my limited income to maximise my satisfaction, a goals referred to as utility maximisation.
Interference of our budget goal are irrational behaviour and sometimes our preferences not clear and we got confused. Becouse our maximum utility is depends on our preferences, price and budget constraints.
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