Questions tagged [consumer-theory]
the study of consumer choice and its fundamental underpinnings in preferences and constraints.
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Is utility in neoclassical economics a circular argument/concept?
Neoclassical economics as a utility function that represents a consumer's preference ordering over a choice set.
Joan Robinson criticized utility for being a circular concept:
"Utility is the ...
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0answers
8 views
First Order Condition - Farm Household Model
Does anyone can help me solve this simple farm household model from the Paper "Delinking land rights from land use: Certification and migration in Mexico" De Janvry 2015.
When I do $\frac{dU}{dhe}$ ...
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0answers
19 views
Marshallian demand derivatives
Hicksian demand derivative is often used to define complements and substitutes.
Is it possible to use Marshallian demand derivatives to define complements and substitutes?
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1answer
26 views
Strongly and strictly increasing utility functions
What's the difference between Strongly and strictly increasing utility functions?
What I know is that if $x'>>x $ where $x'$ has all elements strictly greater than $x$ then $U(x')>U(x)$, I ...
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0answers
13 views
how to draw indifference curve of combination utility function
Given Utility function is U(x1,x2)= Max{0.5x1,0.5x2} + Min{x1,x2} with utility level 30. how to draw the indifference curve?
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1answer
29 views
Sunk cost fallacy- is it a bug or a feature?
I was having a conversation with a colleague regarding sunk costs, and discussion came up that the appeal of falling for the sunk cost fallacy might be a feature rather than a flaw, as it is behavior ...
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1answer
20 views
What does it mean to have a strictly increasing transformation in consumer theory? [closed]
We're discussing utility functions
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0answers
34 views
Imperfect complement indifference curve
Although I've seen many resources about perfect complements, haven't found anything for imperfect ones.
Suppose that with x1 and x2, x2 is used only when there are equal amounts of x1. Any excess of ...
2
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1answer
200 views
Whats the difference between local non-satiation and monotonicity?
Is there a practical difference between local non-satiation and montonicity? Can one exist in a utility function without the other?
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0answers
26 views
Does pareto efficiency implies that aggregate profits are maximized?
Does stating that a contract results in a Pareto efficient allocation imply
that aggregate profits are maximized?
I believe that the answer is false, but can't seem to come up with a counterexample.
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0answers
63 views
Expected utility theory
I allow myself to write to you today, being stuck on a problem related to the Expected utility function properties.
The problem is the following:
A) Let X be a finite set. Suppose >~ is a binary ...
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1answer
28 views
Income Elasticity and Convexity of Demand in Income
What needs to be true about the demand function $z(y)$, where $y$ is income, for the income elasticity $\varepsilon = \frac{dz(y)}{dy}/\frac{z(y)}{y}$ to be always greater than one (so that the good ...
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1answer
62 views
Deriving equation for income offer curve
Sorry if this is a basic question, however I have no idea on how to derive an equation for an income offer curve. All the explanations I'm getting is the graphical one where you just connect the ...
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0answers
22 views
How to find cross price elasticity of demand in case of two perfect substitutes? Please give a mathematical intuition
I saw somewhere that Cross price elasticity of demand in case of perfect substitutes is $\infty$. I do not think that this is right in all the cases. Even if it is, please give a mathematical ...
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0answers
36 views
Afriat's number
I discovered the Afriat's theorem on the possible rationalization of a given data set of demand observations and would like to ask for your help in understanding how to compute Afriat numbers in ...
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0answers
38 views
Consumer Theory - Utility / Costs / Preference
I have the following question:
Violet buys two goods, toys and pens. We do not observe her preference but we
know it satisfies the three assumptions, completeness, transitivity, and more is better. ...
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1answer
41 views
Slutsky Decomposition from Indirect Utility Function [closed]
Given the indirect utility function:
V={M^2}/{4P1P2},
how do we establish the Slutsky Decomposition?
I used Roy's Identity to get the Demand, but I'm stuck with the other components of the Slutsky ...
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0answers
10 views
In what ways is the e-commerce industry imperfectly competitive?
When it comes to the e-commerce industry, what are the aspects to consider or areas to explore? I am mostly asking in relation to amazon. And wanted to get some "expert opinion" of course expert does ...
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0answers
17 views
Can the CPIH be used to find the real terms rise in price of a component of the basket of goods?
I want to calculate the real terms rise in UK private rent prices since 2011 using the CPIH measure. The indexes of nominal rent prices and the CPIH rose by 14.7% and 13.5% respectively, so I can say ...
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1answer
30 views
Consumer Utility Maximization equivalent of economies of scope
Economies of scope captures the idea of having efficiency in variety. I've come across this idea only in producer theory to capture the idea that companies may benefit from their ability to reduce ...
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3answers
82 views
modelling disutility from over consumption
In introductory economics courses the concept of marginal utility is illustrated through simple examples like how much benefit one gets from eating another slice of pizza (i.e first slice provides 100 ...
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0answers
24 views
Relation between Epstein Zin and Power Utility
I found this graph in Campbell and Viceira 2001 at page 35-36 (https://faculty.fuqua.duke.edu/~charvey/Teaching/BA453_2006/Campbell_Viceira.pdf) which is used to explain the relation between Epstein-...
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0answers
21 views
Determine the range for the amount demanded
A consumer consumes two (and only two) goods A and B. Both goods are ìgoodî in the sense that more of either is strictly better. The consumerís preferences are well-behaved (complete, transitive, ...
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0answers
25 views
Marginal propensity to consume and multiplier effect
Recently I had a conversation with a certain person (call her X) about the marginal propensity to consume (and about the multiplier effect).
With marginal propensity to consume I mean $c_1$ as a part ...
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0answers
17 views
Model of sales of a new product
I am looking for any popular model to calculate sales of a new product under the assumption that some goodnesses of the product are given.
For example, the novelty $N$ and usefulness $U$ of a new ...
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3answers
80 views
What do interest rates tell us about the state of an economy?
I seem to have a misconception about what interest rates mean. On one hand, they signal how high a government's demand for money is, because if a government is ever in any serious need of money, they ...
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1answer
239 views
Pure exchange economy with free and non-free disposal
Question is as follows:
My answers are
(I)
Let k is constant utility level
Then
$$k=\sqrt{x_A^1x_A^2}$$
$$k^2/x_A^1=x_A^2$$
The first derivative is negative. So the indifference curve is ...
0
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1answer
148 views
Question on consumption theory
Question:
What my did is
I proceed this question until that point. But, I will be happy if help me to solve this question.
Thank you.
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0answers
37 views
Natural borrowing/debt limit and other borrowing constraints
When confronted with the simple household consumption maximization problem under uncertainty (and with Arrow security sequential trading)
$$\max_{\{c_t(s^t),a_{t+1}(s^t,s_{t+1})\}_{t=0}^{\infty}}\...
5
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1answer
86 views
Utility Maximisation Subject to Income and Time Constraints
The consumption of economic goods often takes time. Consider, for example:
Transport services, eg flights, rail journeys;
Leisure goods, eg watching a film, visiting a park.
I would like to explore ...
4
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1answer
151 views
Money Metric Utility Function: Budget constraints become Utility Functions?
Im currently reading up on the "money metric utility function" (also known as the minimum income function or direct compensation function).
By definition it is defined as:
$$m(\text{p},\text{x})\...
1
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1answer
118 views
Maximization with disposable income
Consider a welfare system u dear which a single cash transfer(guaranteed income ) is given to every citizen. Then for each dollar the person earns the payment is reduced to by a where 00 you get a ...
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1answer
182 views
Question on consumer theory
The story of my question is
I have multiple question.
(1) when John doesn’t work in the underground economy at all , t=0, how can I find the optimal value of $l$ and consumption bundle and his ...
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0answers
80 views
Kuhn Tucker optimization problem and game theory [duplicate]
Consider a game with two players, where each player i= 1 ,2 has preferences $u_i$= $s_i^a$$c_i^{1-a}$, where c_i is the consumption and $s_i$ is social interaction. $s_i$ is given by :
$s_i$ = $t_i$ + ...
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1answer
418 views
Inferior and normal good and the change in price of those goods
In general, We know that if a good is normal, then as your income increases, then demand of that good increases as well as price is fixed. Similarly, if a good is inferior, then as your income ...
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2answers
226 views
Show that First order conditions are necessary and sufficient for utility maximization
I have a budget set
$$B=\{x=(x_1,x_2)\in R^2_+ \mid 2\sqrt{x_1}+x_2\le y\}$$
where $y>0$ is income.
Assuming the preferences are strictly monotonic and convex, I want to show that first order ...
3
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1answer
325 views
Optimization problem with Kuhn-Tucker conditions
Consider a game with two players where each player $i=1,2$ has preferences $u_i=s_i^a c_i^{1−a}$, where $c_i$ is consumption and $s_i$ is social interaction. $s_i$ is given by $s_i=t_i+t_{ij}\times t_{...
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1answer
75 views
Kuhn Tucker optimization problem
Assume that the player I select $x_i \ge 0$ at constant cost level $c>0$
The payoff function for player i is
$$v(x_i,t)-cx_i$$
where $t$ is technology parameter.
The function v(.)is twice ...
2
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1answer
88 views
How to write budget constraint if the agent sell the goods that buy
Della’s utility is $U(G,R)$
G is the consumption of gasoline per week
R is the the consumption of other goods
Just help me to write down budget constraint.
I think that
$$R*1+(G-20)*10+20*1=...
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0answers
17 views
Do ads work for businesses as they used to and how can they be measured if it's possible?
The gist of Seth Godin's 'Purple Cow' is that advertisements don't work any more.
As marketers, we know the old stuff isn't working. And we know why:
because as consumers, we're too busy to pay ...
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3answers
61 views
In Supply and Demand is Quantity the Amount of Inventory of the Amount of Units Sold?
I am new to economics in school and we are going over supply and demand. This may sound like a very simple question, but I just need one thing clarified. When quantity is mentioned in the graphs is ...
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1answer
29 views
Reference Request on consumer theory
I am looking for a recent literature review of consumer demand theory and its empirical applications. I have tried common places (google scholar, jel and jep papers) but no success. Any help is really ...
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1answer
35 views
Will a consumer be more, or less willing to give up a commodity (for the other) for which they have been substituting another? [closed]
Statement: "Indifference curve analysis is based on the assumption of diminishing marginal rate of substitutiins. This means that as the consumer substitutes more and more of one commodity (say X) for ...
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2answers
63 views
How can I motivate a dynamic model using utility and consumer preference where only one good is affected by past consumption?
I've been looking how I can motivate the model I want to estimate using a utility optimization framework. Basically, I want to write a model using two goods: x and y, in two periods: 1 and 2, where ...
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1answer
31 views
Show that strict preference ordering is not reflexive
How do i show that the strict preference (>) ordering is not reflexive. I've tried to prove this by asymmetry but I am not sure this is the way to do it. Any help? Thank You.
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1answer
66 views
Utility Functions: Implying endless consumption?
Do utility functions imply that if a consumer's income infinite, his consumption should also be infinite? The reason why I'd think this is the case is based on my basic understanding of utility ...
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0answers
48 views
Econometric estimation of Engel curves (or demand?)
The problem is the following: Data is a family survey of expenditures on commodity groups.
An exercise told I should estimate the next equation:
$$w_{j}=ß_{j}+\gamma_{j}log(cons)+a_{j}z+u_{i} $$
...
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0answers
22 views
Where does a monopsonist consume?
The classic formula for where a monopolist produces is where marginal revenue equals marginal cost.
Is there a similar formula for a monsopsonist?
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0answers
194 views
Why or when does the area under the demand curve equals the total utility for consumers (perfect competition)?
Why or when does the area under the demand curve equals the total utility for consumers (perfect competition)?
From the demand side, one knows that when combining the utility function and the budget ...
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1answer
63 views
Has any person ever actually planned his or her consumption according to Modigliani’s LCH?
https://en.wikipedia.org/wiki/Life-cycle_hypothesis?wprov=sfti1
It seems self-evident to me that nobody on Earth actually does this. Real people are short-sighted, undisciplined, and lack the ...
