Utility maximization problem

This article has multiple issues. Please help improve it or discuss these issues on the talk page. (Learn how and when to remove these messages) This article includes a list of general references, but it lacks sufficient corresponding inline citations. Please help to improve this article by introducing more precise citations. (August 2010) (Learn how and when to remove this message) This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Utility maximization problem" – news · newspapers · books · scholar · JSTOR (March 2011) (Learn how and when to remove this message) (Learn how and when to remove this message)

Utility maximization was first developed by utilitarian philosophers Jeremy Bentham and John Stuart Mill. In microeconomics, the utility maximization problem is the problem consumers face: "How should I spend my money in order to maximize my utility?" It is a type of optimal decision problem. It consists of choosing how much of each available good or service to consume, taking into account a constraint on total spending (income), the prices of the goods and their preferences.

Utility maximization is an important concept in consumer theory as it shows how consumers decide to allocate their income. Because consumers are modelled as being rational, they seek to extract the most benefit for themselves. However, due to bounded rationality and other biases, consumers sometimes pick bundles that do not necessarily maximize their utility. The utility maximization bundle of the consumer is also not set and can change over time depending on their individual preferences of goods, price changes and increases or decreases in income.