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Economics - Microeconomics - Utility Maximization

Utility Maximization
  In the theory of a competitive firm, the supply and demand functions were derived from a model of profit-maximizing behavior and a specification of the underlying technological constraints. In the theory of the consumer we will derive demand functions by considering a model of utility-maximizing behavior coupled with a description of underlying economic constraints.

Consumer preferences: We consider a consumer faced with possible consumption bundles in some set X, his consumption set. In economic analysis it is often convenient to summarize a consumer's behavior by means of a utility function; that is, a function u: X R such that x > y if and only if u(x) > u(y). It can be shown that if the preference ordering is complete, reflexive, transitive, and continuous, then it can be represented by a continuous utility function.

In theory the consumer will derive demand functions by considering a model of utility-maximizing behavior coupled with a description of underlying economic constraints which is his budget constraint.
 
 

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