Utility theory is a concept in economics that helps explain how individuals make choices based on their preferences and the satisfaction they derive from different options. It assumes that people aim to maximize their overall happiness or "utility" when faced with decisions, whether it's choosing between products, investments, or other alternatives. In utility theory, each choice is assigned a utility value, which represents the level of satisfaction it provides. This allows individuals to compare different options and select the one that offers the highest utility. The theory is foundational in understanding consumer behavior and is often applied in fields like microeconomics and game theory.