Utility Maximization: Our analysis of consumer behavior is based on the idea that consumers make purchases so as to maximize utility from consumption. Maximizing utility simply means choosing the mix of goods and services, among all those available given income and prices, that gives the greatest satisfaction.

You might be wondering how consumers can maximize utility when most consumers aren't familiar with the idea of utility maximization. Fortunately, maximizing utility doesn't require even knowing what utility means. All that is required to maximize utility is the ability to decide which affordable purchases give the most satisfaction.

The way this works is very simple. If a consumer has $5 to spend, and if she spends the $5 in a way that gives her more satisfaction than any other $5 purchase at that moment, she is successfully maximizing utility.

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