Question

If people do not have a complete mental picture of total utility for every level of consumption, how can they find their utility-maximizing consumption choice?

Short answer

The utility maximizing choice can be made on the basis of the dollar value of the commodities.

Step-by-step solution

Step 1. Introduction:

The assumption underlying economic analysis of household behavior is that individuals search the greatest level of utility or satisfaction. Individuals are the only ones who can judge their own utility. In general, increased consumption of a good results in increased total utility.

Step 2. Explanation:

If individuals do not have a mental picture of utility, deciding the marginal utility for each level of consumption can help them find the utility-maximizing consumption decision. One can choose a random initial point, compare the marginal utility gains and losses of moving to neighboring points, and then choose the preferred option. Consumers who are rational compare value for money. If one good is more valuable than another, people will buy more of the former and less of the latter. People make decisions at the margins rather than on the basis of totals.