Final answer:
Karen's and Liz's utility functions for breakfast choices, UK=P+2W and UL=2P+W respectively, demonstrate their subjective preferences, indicating Karen favors waffles while Liz prefers pancakes. Utility is subjective, and utils are a theoretical measure of satisfaction that can't be compared across individuals. The law of diminishing marginal utility also indicates that additional units of consumption provide progressively less utility.
Step-by-step explanation:
Karen and Liz's utility functions, represented as UK=P+2W and UL=2P+W, provide insights into their preferences for breakfast items at a restaurant. Karen's utility function suggests she values waffles (W) twice as much as pancakes (P), implying she would likely choose a breakfast with more waffles over one with more pancakes. Liz's utility function, on the other hand, indicates she places a higher value on pancakes, and would therefore prefer a breakfast offering more pancakes. These utility functions help us understand that, given the subjective nature of utility, each person's food choices maximize their own satisfaction based on their unique preferences.
The concept of utils is a hypothetical and unquantifiable measure of utility, which implies that satisfaction derived from goods and services is inherently subjective and personal. Therefore, it is not legitimate to make interpersonal comparisons of utility. Furthermore, the law of diminishing marginal utility suggests that each additional unit of a good consumed provides less utility than the previous one, a critical factor in understanding consumer choices and preferences.