Utility maximisation
Definition. Utility maximisation is the assumption that a rational consumer aims to gain the greatest possible total satisfaction, or utility, from spending a limited income. The consumer chooses the combination of goods that yields the most utility given the prices of goods and the budget constraint.
This is achieved when the marginal utility per dollar spent is equal across all goods. It underpins the theory of consumer choice and the downward sloping demand curve.
This term belongs to Rational Decision Making in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
Want to use utility maximisation for marks in the exam? Learn it in class or message the team.