Now let's take a closer look at the idea of maximization of utility, and see in a little more detail how to make the transition from utility, in undefined subjective units, to benefits, measured in dollars.
As a start, we will look at the cokes and burgers example in terms of utility. Let's suppose that Joe Blow is going to lunch, thinking of eating burgers and drinking cokes. Here, for the example, are Joe's utility numbers for cokes and burgers.
| Burgers | Cokes | |
|---|---|---|
| 1 | 100 | 65 |
| 2 | 150 | 75 |
| 3 | 170 | 80 |
| 4 | 180 | 80 |
Looking at the table, we see the quantity of burgers or cokes in the column at the left, and the total utility gained from consuming that quantity of burgers in the second column, and from that quantity of cokes in the third column. There is a hidden simplifying assumption here -- we are assuming that the utility of burgers doesn't depend directly on the consumption of cokes, and vice versa. That's unrealistic, of course, but making the example realistic would mean we would have to use calculus to go through it -- and we would come out with the same answer, for our trouble. So we will go ahead with the simplifying assumption.
With that in mind: suppose that Joe consumes two burgers and three cokes. (OK, Joe is really hungry!) How much utility would that give him? The burgers give 150 units of utility and 3 cokes give 80 units of utility, for a total of 230 units of utility. But Joe can do better than that.
