# Questions tagged [consumer-theory]

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

270 questions
Filter by
Sorted by
Tagged with
151 views

### Example of a rational and continuous preference relation that does not admit a utility representation

It is well-known that a rational, continuous and monotone preference relation $\succeq$ defined on $\mathbb{R}^L$ admits a utility representation. I would like to understand why monotonicity is ...
160 views

### what is $b(p)$ in the Almost Ideal Demand System?

In Hal Varian's Microeconomic analysis (page 213) he discusses the Almost Ideal demand system. There he describes the AIDS system as follows: The almost ideal demand system (AIDS) has an ...
43 views

### 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 ...
117 views

### Imperfect substitute

Perfect substitute- Pepsi and Coca-Cola and Imperfect substitute- Tea and Coffee . Here why tea and coffee considered imperfect substitute?
298 views

### 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 ...
326 views

### 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 ...
48 views

### 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 ...
244 views

### 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 ...
264 views

### 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 ...
1k 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 ...
49 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 ...
237 views

### What does it mean to have a strictly increasing transformation in consumer theory? [closed]

We're discussing utility functions
2k 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?
50 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 ...
821 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 ...
69 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 ...
178 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 ...
21 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 ...
88 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 ...
352 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 ...
89 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 ...
21 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 ...
221 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 ...
547 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 ...
412 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.
127 views

171 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 ...
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 ...