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Utility, or usefulness, is the (perceived) ability of something to satisfy needs or wants.

3 votes
Accepted

Indirect utility from expenditure function

One possible way is $v(p,w)=e(p,v(p,w))$ where $v$ is the indirect utility function, $p$ the price vector and $w$ the wealth. …
Sander Heinsalu's user avatar
1 vote

What is the difference between solving for utility maximization separately or aggregately?

Under what constraints is $u_1+u_2$ maximized? The exercise may be about the First Welfare Theorem: a competitive equilibrium is Pareto efficient. In this case, maximizing the sum may be designed to h …
Sander Heinsalu's user avatar
5 votes

Does risk aversion cause diminishing marginal utility, or vice versa?

The utility function is a representation of preferences, which are traditionally inferred from choices. Preferences come before utility. … I would not call the connection between utility and preferences causality, just a mathematical relationship. …
Sander Heinsalu's user avatar