Selecting the best utility function for households?

Question

I have little to no background in micro, but I'm learning about utility functions. It seems that there are many forms of utility functions for households. In general terms, how does one go on to select a given functional form. Are there a class of utility functions for households that are better than others? How does one even judge better, in this context? Does the selection of a utility function depend on the context and analysis at hand?

Answer 1

Utility functions in microeconomics are used to illustrate how an individual values the consumption of different goods. We usually model the choice between just two goods. It is possible therefore that a consumer might possess many different utility functions, depending on the goods they are considering. The idea of there being some 'optimal' utility function for a household therefore does not make much sense in the context of consumer choice theory.

Utility functions are simply a mathematical expression that is trying to model the preferences of an individual. One person might consider beer and wine to be perfect substitutes (they just care about consuming alcohol) and another person might have a strong preference for beer over wine. Their utility functions will be different.