Check this graph:
I call this the "how-much-I-care" graph. We've used money here, but we can substitute it with effort (for school grades), interest (for a date), energy spent playing with the kids (for peace at home), or whatever we like.
If this is me, well I care a lot about that first $500. I like to be able to eat and survive. But if I'm already earning $5000 a month, I really don't care about another $500. This depends on what I use the money for (a later post), of course, as not all expenses are equal. But in general the more I have, the less I care.
The point is, economics tells us that it's not practical to want more of the same thing beyond a point. There is a time when it's just not worth it. This is where moderation becomes important.
Let's look at our lives. We perhaps have 16 waking hours in which to be productive per day. Then we need to rest, recover and do it all again.
What do we do with this precious resource?
Do we work 8 hours to make a living? Probably good. It gives us the money to survive and buy nice things every now and then.
Or do we decide to work 12 hours, 14 hours? Is that extra time worth it? We know that each extra hour becomes less worthwhile. So where is our cut-off point?
Utility in economics is given by a subjective number (for example 0 to 100) based on how much the person cares. If you're the graphing type you can try it out yourselves and see if you get something that looks like the one above.
This measure is subjective. Only we can decide this for ourselves. But if we really want to 'maximize our utility' in econspeak, we should have a range of options, so we can get that initial $500 hit of happiness in each one.
