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Tagged with lagrangian consumer-theory
4 questions
1
vote
1
answer
103
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Logarithmic Utility function Algebra
Question:
I'm told the following (by an exam mark scheme):
Using $a + b =1$
$a[ln(\frac{am}{p_1})] + b[ln(\frac{bm}{p_2})] = ln(m) - aln(p_1) - bln(p_2)$
I can't get this to hold without the ...
- 1,011
2
votes
0
answers
39
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Does local non-satiation hold for this problem?
I am getting some confusing results solving this problem:
$max_{c_0\geq0, c_1\geq0} \bigg\{EU = R(1-c_0) [p t_1 + (1-p) c_1^{-2} t_2] \bigg\} ~ s.t. ~c_0+c_1 \leq 1$
where $p$ is the probability of $...
- 33
5
votes
1
answer
354
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Nonlinear budget constraints (for quantity discounts)
I was thinking about quantity discounts and if there is a possibility to model them not as bundles (as is typical for second price discrimination) but rather as prices being some continous functions ...
- 834
0
votes
0
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42
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How to derive consumer expenditures in EMEA 14.2.5
I am working on a problem 14.2.5 from EMEA by Sydsaeter, Hammond and Strom.
Consider the consumer demand problem:
$$ \max_{x,y} U(x,y) = \alpha \ln(x-a) + \beta \ln(y-b) \text{ s.t. } px+qy=m \tag{*} ...
- 1,935