For those who know a bit about economics.

Here's a joke about utility functions.

I thought of this one myself

enjoy your day

reinout-g Jul 5, 2014

#1**+6 **

Reinout can you please explain the joke for those who dont know a bit about economics!

rosala Jul 5, 2014

#2**+6 **

Sure, I'll try to keep it as simple for you as possible

Suppose you have two goods, eg. apples and pears.

Then a utility curve describes what combinations of goods you're indifferent between.

For example, you might like 4 pears and 2 apples just as much as you like 2 pears and 4 apples or 3 pears and 3 apples. All these 'bundles' of pears and apples which you find equally attractive are described on one curve called a utility curve. Now every single curve is given a number. This one might for example have the number 2. Now suppose we have a bundle of 6 pears and 3 apples. Let's assume that you like 6 pears and 3 apples more than 4 pears and 2 apples but you like eg. 3 pears and 6 apples just as much. Then this bundle is on another utility curve with for example the number 4. The higher the number associated with the curve, the more you like all the bundles on the curve. Now if we graph all these curves in one set of axis, we can , given the prices and your income, determine which bundle you prefer most to spend your money on. For example it might be that with €5 you can buy either 6 pears and 3 apples or 2 pears and 4 apples. Since we know that 6 pears and 3 apples lies on the utility curve with number 4 and 2 pears and 4 apples lies on the utility curve with number 2, we know that you like 6 pears and 3 apples better and should therefore buy that combination.

Now the most regular kind of utility curves are the ones you see in the first graph.

'what economists think my utility curve looks like'

The second one clearly leans towards 'stuff I don't really need to buy' (That stuff you buy which you think is awesome but end up using way to little)

And the third one, well... I think you can figure that one out yourself.

It's not like I can make sense of that

reinout-g Jul 5, 2014