Questions tagged [consumer-theory]
the study of consumer choice and its fundamental underpinnings in preferences and constraints.
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0answers
31 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. ...
0
votes
0answers
20 views
Could an economy based on paying after use be viable [on hold]
I recently thought about the fact that a lot of people are not actually paying for some cultural stuff like video games or movies. So i wondered if paying after seeing a movie or playing a video game ...
0
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1answer
22 views
Slutsky Decomposition from Indirect Utility Function [on hold]
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 ...
0
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0answers
9 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 ...
1
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0answers
16 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 ...
1
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1answer
20 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 ...
3
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3answers
62 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 ...
0
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0answers
16 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, ...
2
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0answers
17 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 ...
1
vote
0answers
16 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 ...
0
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3answers
58 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 ...
1
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1answer
181 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
votes
1answer
131 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.
1
vote
0answers
28 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)
$$\max_{\{c_t(s^t),a_{t+1}(s^t,s_{t+1})\}_{t=0}^{\infty}}\...
5
votes
1answer
82 views
Utility Maximisation Subject to Income and Time Constraints
The consumption of economic goods often takes time. Consider, for example:
Transport services, eg flights, rail journeys;
Leisure goods, eg watching a film, visiting a park.
I would like to explore ...
2
votes
1answer
47 views
Money Metric Utility Function: Budget constraints become Utility Functions?
Im currently reading up on the "money metric utility function" (also known as the minimum income function or direct compensation function).
By definition it is defined as:
$$m(\text{p},\text{x})\...
1
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1answer
99 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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votes
1answer
165 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 ...
1
vote
0answers
77 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$$c_i^{1-a}$, where c_i is the consumption and $s_i$ is social interaction. $s_i$ is given by :
$s_i$ = $t_i$ + ...
-1
votes
1answer
132 views
Inferior and normal good and the change in price of those goods
In general, We know that if a good is normal, then as your income increases, then demand of that good increases as well as price is fixed. Similarly, if a good is inferior, then as your income ...
2
votes
2answers
127 views
Show that First order conditions are necessary and sufficient for utility maximization
I have a budget set
$$B=\{x=(x_1,x_2)\in R^2_+ \mid 2\sqrt{x_1}+x_2\le y\}$$
where $y>0$ is income.
Assuming the preferences are strictly monotonic and convex, I want to show that first order ...
3
votes
1answer
281 views
Optimization problem with Kuhn-Tucker conditions
Consider a game with two players where each player $i=1,2$ has preferences $u_i=s_i^a c_i^{1−a}$, where $c_i$ is consumption and $s_i$ is social interaction. $s_i$ is given by $s_i=t_i+t_{ij}\times t_{...
0
votes
1answer
72 views
Kuhn Tucker optimization problem
Assume that the player I select $x_i \ge 0$ at constant cost level $c>0$
The payoff function for player i is
$$v(x_i,t)-cx_i$$
where $t$ is technology parameter.
The function v(.)is twice ...
2
votes
1answer
85 views
How to write budget constraint if the agent sell the goods that buy
Della’s utility is $U(G,R)$
G is the consumption of gasoline per week
R is the the consumption of other goods
Just help me to write down budget constraint.
I think that
$$R*1+(G-20)*10+20*1=...
0
votes
0answers
15 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 ...
0
votes
2answers
45 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 ...
3
votes
1answer
27 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 ...
-1
votes
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 ...
1
vote
2answers
53 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 ...
1
vote
1answer
24 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.
0
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1answer
65 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 ...
0
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0answers
40 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:
$$w_{j}=ß_{j}+\gamma_{j}log(cons)+a_{j}z+u_{i} $$
...
0
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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?
0
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0answers
156 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 ...
0
votes
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 ...
1
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0answers
107 views
MWG Example 3.E.1
I do not understand how Mas-Collel, Whinston, and Green derive the Hicksian demand functions in Example 3.E.1 in their textbook.
Allow me to give further background regarding the problem: The ...
1
vote
1answer
121 views
Bliss point utility doubt
Why is the bliss point utility function convex even though it has concave portions to it ?
According to Nicholson and Snyder (authors of Microeconomic theory - Basic principles and extensions) a ...
1
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0answers
118 views
Consumer surplus from a Hicksian demand curve: what is it?
A Hicksian demand curve indicates how much of a good will be demanded given price holding level of overall utility fixed.
When in equilibrium with a supply curve we end up with this area we would ...
2
votes
2answers
94 views
what is consumer surplus practically?
In Microeconomics producer surplus is equivalent to profits.
However getting a tangible definition of consumer surplus has been difficult for me to ponder.
What is the practical use of knowing ...
7
votes
1answer
178 views
Intuition for why $EV>CV$ for a normal good
I understand the mathematical proof and the graphical illustration behind this property ($EV>CV$ for the variation in the price of a normal good), but I still do not understand the economic ...
5
votes
2answers
107 views
Does consumer theory assume that utility functions are consistent overtime?
I'm interested in how we model a consumer with a changing utility function over time.
Example: an individual's demand for candy/sweets at 10 years of age will be different when he is 20,30 or 40 ...
4
votes
2answers
59 views
Consumer behavior with constrained demand
Suppose there is a linear demand function $D(p)$ describing the demand of an individual consumer. This is derived from a utility function or is just observed, but let us assume it is correct. Now ...
5
votes
2answers
86 views
If the (direct) utility is concave in all goods, is the indirect utility necessarily concave in wealth?
Suppose that the direct utility $u(x_1,...,x_n)$ is concave in each of its arguments. Does this imply that the indirect utility $U(w,p)$ is concave with respect to $w$? If all goods are normal than ...
9
votes
1answer
631 views
Homogenous of degree one in utility function.
Question
My solution is as follows. Please check my solution. If I make a mistake, please tell. I am really not sure about my solution. Thank you
U(x) is homogenous of degree one i.e. u(...
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1answer
137 views
Empty edgeworth box [closed]
Can a empty edgeworth box be a pareto set? What kind of economy would be describe in this situation?
2
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0answers
52 views
Could be this picture be interpreteded as a pareto set? [closed]
Hi, is there a way to interpret this picture as a Pareto set? What assumptions are necessary for such an interpretation?
2
votes
2answers
1k views
Why does local non satiation imply the constraint is binding?
Local non satiation says that for any $x \in X$ and $\epsilon > 0$, there exists $y \in X$ such that $d(x,y) < \epsilon$ and $U(x) < U(y)$.
I don't understand why this implies that $px^* = m$...
0
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0answers
254 views
Euler equation - Intuition behind setting $\beta(1+r)=1$ if the economy is closed
The Euler equation is:
$$u(C_{t})=\beta(1+r)U(C_{t+1})$$
In my lecture notes, I noted that my prof. said something like:
Since our economy is closed, we are going to assume that $\beta(1+r)=1$
...
2
votes
1answer
439 views
Explaining why Hicksian demand is more inelastic to intermediate micro student
How would you best explain to a student in intermediate micro class that the Hicksian demand for a normal good is more inelastic than the Walrasian demand without heavy differential calculus?
When I ...
