Questions tagged [consumer-theory]

the study of consumer choice and its fundamental underpinnings in preferences and constraints.

243 questions
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What is an example application of a quasilinear utility function?

I am told a quasilinear utility function is a function like $$U(x,y) = \sqrt{x}+y$$ My Question: Can someone provide a real world example of a quasilinear utility function?
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Consumer behaviour [closed]

If the last dollar spent on commodity X gives him less marginal utility, he will withdraw this amount from X and spend it on Y if it gives him higher marginal utility. Here consumer how can consumer ...
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Imperfect substitute

Perfect substitute- Pepsi and Coca-Cola and Imperfect substitute- Tea and Coffee . Here why tea and coffee considered imperfect substitute?
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feature of indifference curve [closed]

The characteristic feature of indifference curve is that it will not touch the X axis or Y axis. But as a special case it will touch the Y axis if the combination is between Money and Commodity. "If ...
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Differences between Slope of budget line and MRS?

Slope of budget line= change in y/ change in x and also Marginal rate of substitution= change in y/ change in x. If the definitions are same of both then what is the difference between the two? I ...
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Are lexicographic preferences strictly monotonic?

I'm a bit confused about lexicographic preferences and whether they abide by the strict monotonicity axiom. The definition we were given for strict monotonicity is: For any two bundles $x$ and $y$,...
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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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Differences between Hicksian and Slutskian approaches

When deriving the substitution effect for both Slutskian and Hicksian definitions, a 'phantom' budget line is drawn.However, for a Slutskian definition, the 'phantom' budget line is drawn parallel to ...
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If the consumer is not a price taker, does she still set marginal rate of substitution equal to the price ratio?

Consider some consumer who consumes good $x$ and $y$. The price of $x$ is fixed to be $k$. The price of $y$ is $c(y)$. The consumer's marginal rate of substitution is given by $\frac{-x}{y}$. If the ...
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Proof for homogeneity of elasticities

Throughout microeconomic literature i see the following restiriction placed on the nature of elasticities in demand system estimation. This being for some arbitarary good $x$ we require price ...
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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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What does it mean to have a strictly increasing transformation in consumer theory? [closed]

We're discussing utility functions