Question

why do economists use a utility function to present an economic agent’s preference ? Is this utility- based approach plausible?

Answer 1

Utility function is synonymous with happiness, satisfaction, welfare and state of being better off. When alternatives are given, an economic agent tends to choose the alternative that makes him happier, more satisfied and places him in a better state. Unfortunately there is no factor or index or parameter to measure the state of happiness, satisfaction or well being. Utility function is an attempt by economists to assign numbers and quantify this state of happiness. The function is defined or created in such a manner that it shows a higher value for an alternative that is likely to land the agent in a happier and more satisfied state. This is the reason why economists use a utility function to present an economic agent’s preference.

Yeah, i believe the utility-based approach is plausible:

1. It does correctly predicts the agent's choice of the alternative.
2. It doesn't illustrate the psychological decision making behavior of the agent, but it does predict the alternative that will make the agent happier.