Abstract
This chapter focuses on utility function, which is a numerical representation of a preference ordering. It is useful to consider each commodity as being linked with an axis in the space of dimension, n, of real numbers, Rn. A commodity may not be characterized by strictly negative numbers. The symbol u can be interpreted as measuring the satisfaction derived from the consumption of alternative consumption bundles. It is intuitively clear that restrictive assumptions will have to be made, that is, some possible irregular properties will have to be excluded from the analysis. Economic theory formulates these assumptions as axioms, that is, as statements that are accepted as being true without proof. Debreu theorem does not imply uniqueness of the utility function. Any monotonic transformation of a utility function is also a utility function. While the direct utility function probably has greater intuitive appeal, the indirect utility function is not without its claims to interest also, for it is the foundation of constant utility index numbers of the cost of living.
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