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2 edition of Duality of expenditure and continuous utility functions. found in the catalog.

Duality of expenditure and continuous utility functions.

F. P. Murphy

Duality of expenditure and continuous utility functions.

by F. P. Murphy

  • 148 Want to read
  • 21 Currently reading

Published by Department of Economics, Brunel University in Uxbridge, Middx .
Written in English


Edition Notes

SeriesDiscussion papers in economics / Brunel University -- no. 8806, Discussion papers in economics -- no. 8806.
The Physical Object
Pagination17p.
Number of Pages17
ID Numbers
Open LibraryOL14497925M

Duality and the Geometry of the Income and Substitution Effects Michael J. Panik* Faculty of Economics, University of Hartford, U.S.A. Abstract The geometry of the Hicks-Slutsky income and substitution effect is framed in terms of the consumer’s expenditure function and expenditure equation and thus can be studied with-. Properties of Expenditure Function The expenditure function exhibits four important properties. 1. The expenditure function is homogenous of degree one in prices. That is, e(p1;p2;u) = e(fip1;fip2;u) for fi > 0. Intuitively, if the prices of x1 and x2 double, then the cheapest way to attain the target utility does not change.

  CES Utility: Solve for Demands, Indirect Utility and Expenditure Function - Duration: Economics in Many Lessons 5, views. (a) Deflne the expenditure function (either mathematically or in words). (b) Intuitively explain why the expenditure function is concave in prices. Solution (a) The expenditure function is the minimal expenditure needed to attain a target utility level. (b) Suppose p1 rises. If I keep my demands constant then I attain the same utility level and my.

  Derive Utility Function from Expenditure Function - Duration: Economics in Many Lessons 1, views. the expenditure function by differentiation. Both the Marshallian and Hicksian demand functions are obtained only as implicit functions when one derives demand directly from the utility function by the conventional Lagrange method. The purpose of this essay is to prove some strong duality theorems. We begin by defining a class of admissible utility functions U and we characterize the set of expenditure functions 8 and indirect utility functions .


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Duality of expenditure and continuous utility functions by F. P. Murphy Download PDF EPUB FB2

Expenditure Functions and Duality I For a consumer with utility function u(x), the Hicksian demand correspondence h(p;u) maps prices and utility to the set of cheapest bundles at prices p that yield utility h(p;u).

I For price vector, p and utility u, the expenditure function, e(p;u), reports the lowest cost at which you could a ord to achieve utility Size: KB. The Expenditure Function De–nition Given a continuous utility function u: Rn +!R, the expenditure function e: Rn ++ nu(R +)!R + is de–ned by e(p;v) = px for some x 2h (p;v).

This is the function that tracks the minimized value of the amount spent by the consumer as prices and utility File Size: KB. INDIRECT UTILITY Utility evaluated at the maximum v(p;m) = u(x) for any x 2 x(p;m) Marshallian demand maximizes utility subject to consumer’s budget.

It is a function of prices and income. Substituting Marshallian demand in the utility function we obtain indirect utility as a function File Size: 43KB. Direct and indirect utility functions are connected by Legendre’s duaI transformation.

Based on these duality relations, a number of theorems on the structure of utility functions and demand. Journal of Mathematical Economics 15 () North-Holland CONTINUOUS UTILITY FUNCTIONS IN CONSUMER THEORY A Set of Duality Theorems* Matthew O.

JACKSON Stanford University, Stanford, CAUSA The aim of this paper is to characterize, in terms of primitives, the class of expenditure functions and the class of indirect utility functions that are associated with the Cited by: 6.

Duality Theory: From Expenditure to Utility Expenditure and Utility Functions Minkowski Theorem at Work 74 CHAPTER 2 Theoremso that it is continuous, strictly increasing, and unbounded above in. CONSUMER CHOICE AND DUALITY 1.

DUALITYRELATIONSHIPS Utility Function. The utility maximizationproblem for the consumer is asfollows max x≥0 v(x) ≤ m (1) where we assume thatp >>0, m >0andX=RLThe solutionto 1 is given by x(p,m) = g(p,m). Indirect Utility Function: Properties.

Theorem. The indirect utility function has the following properties: 1. Homogeneity of degree 0: for all. λ > 0, v (λ. p, λ. w) = v (p, w). Continuity: if u is continuous, then v is continuous on {(p, w): p» 0, w ≥ 0}. Monotonicty: v (p, w) is non-increasing in p and non-decreasing in w. EXPENDITURE FUNCTION Solve the indirect utility function for income: u = U∗(P x,P y,M) ⇐⇒ M = M∗(P x,P y,u) M∗(P x,P y,u)=min{P x x+P y y|U(x,y) ≥u} “Dual” or mirror image of utility maximization problem.

Economics — income compensation for price changes. Solutions to selected problems from homework 1. For the general Cobb-Douglas utility function, derive the indirect utility function and the expenditure function. We have that the demand function for the good x as we can get both the expenditure function and the Hicksian demand through duality.

Question 5 For the utility function u(x. Duality Advanced Microeconomics Consumer theory: optimization and duality Jan Hagemejer Octo is a continuous utility function representing consumer preferences money/expenditure and utility. Introduction The consumer roblemp Duality.

Introduction The consumer roblemp. Duality of Utility Maximization and Expenditure Minimization. The duality is two way: 1) If the Marshallian demand X* solves the utility maximization and gives u=V, then the X* also solves the expenditure minimization that subjects to V=u.

maximum (continuous objective function over a compact range). 1 If we assume that preferences are rational and continuous, the utility function is continuous. 2 Compact constrain set. If p ˛0 and m 0, boundedness follows.

We need the price of every good to be greater than 0 in order to avoid the obvious problem that people that the demand for.

Two Properties of Expenditure functions Proof that e(p;u) is a concave function of p. Proof: We want to show that for any uand any two price vectors pand p0, and for any between 0 and 1. Duality between direct and indirect utility functions: Differentiability properties.

Author links open overlay Duality in consumer theory and production theory has been actively investigated in the last decades. This paper responds to the question: ‘On what conditions on the primal function can be ensured the differentiability of the dual.

Microeconomics Assignment Help, Utility-expenditure duality, Utility-Expenditure Duality: Consider the minimisation of the expenditures necessary to achieve a specified utility level. The solution for qi yields the compensated demand functions.

If the solutions for qi are substituted in one obtains the. expenditure functions and preferences. Both sections present under minimal assumptions a characterization of the expenditure function, and duality results for expenditure func­ tions and preferences.

For utility functions the conditions characteristic of an expenditure. EXPENDITURE FUNCTION. The expenditure function is defined as the minimum expenditure required to attain a utility level u, given goods prices. That is, C * (p 1, p 2, u) = min p 1 x 1 + p 2 x 2 s.t.

U(x 1, x 2)=u You can see that the expenditure function is formally equivalent to the cost function introduced in producer theory. All their. Recap: expenditure function and hicksian demand The expenditure function is the value function of the EmP: e(p,u) = min p x s.t.

u(x) u In the EmP we nd the bundles that assure a xed level of utility while minimizing expenditure the expenditure function gives the minimum level of expenditure needed to reach utility u when prices are p.

Summing up. A note on duality in consumer theory. inverse expenditure functions and distance functions. the class of indirect utility functions that are associated with the class of continuous utility.

Consumer Theory - Expenditure Function & Compensated Demand Expenditure Function - E(P, u) ≡ Min P⋅x st U(x) ≥ u and x ≥ 0; optimized value function of the dual to the utility maximization problem (i.e., trying to minimize what consumer would have to spend at given prices in order to achieve a specific value of utility).Expenditure function only explains that the consumer requires the minimum expenditure to achieve utility u.

It is in the form of purchase of various goods and services. It is the lowest possible expenditure curve that still has at least one point in common with indifference curve u.quantities and prices which arise as a consequence of the hypotheses of optimization and convexity. Connected to this duality are the relationship between utility and expenditure functions (and profit and production functions), primal and dual linear programs, shadow prices, and a variety of other economic concepts.