Utility theory

Imagine you have some toys and candies. You really like both of them, but you can only have one at a time. You have to decide which one to choose. This is where utility theory comes in.

Utility theory helps you make decisions by assigning values, which we will call "utils," to your options. Utils are imaginary points that measure how much you like something.

For example, if you really like toys and you have 10 toys, then the first toy you get might be worth 10 utils to you. The second toy might be worth 8 utils, the third toy might be worth 6 utils, and so on. The same goes for candies. The first candy might be worth 10 utils, the second candy might be worth 8 utils, and so on.

You might think that you would always choose the option with the highest number of utils, but it's not that simple. There are other factors to consider, like the cost of the toys and candies, and how much time it takes to get them.

For example, if you have to walk for an hour to get a candy that's worth 10 utils, and you can get a toy that's worth 8 utils by walking for just 5 minutes, you might choose the toy even though the candy has more utils.

In real life, we use utility theory to make decisions about things like what job to take, what car to buy, or where to live. It helps us choose the option that will give us the most satisfaction, based on our personal preferences and circumstances.