Questions tagged [perfect-substitutes]
The perfect-substitutes tag has no usage guidance.
10
questions
1
vote
1
answer
57
views
Income effect in perfect substitutes if the already cheaper good becomes more cheaper?
Consider a simple utility function U(x,y) = x+y such that Px < Py (which means only x is being consumed at optimal point, a corner solution).
In this case, assume Px falls further. Now won't the ...
- 143
1
vote
1
answer
535
views
How to find the contract curve for a funky utility involving the min operator?
Suppose a pure exchange economy where agents’ ($A$ and $B$) preferences are given by the following utility functions:
$u_A = \min(3x+y,x+3y)$
$u_B = x^\frac{1}{2} y^\frac{1}{2}$
Find the contract ...
- 2,196
2
votes
2
answers
193
views
Finding Walrasian equilibria when Walrasian demands are not unique
I'm trying to solve the following excercise:
Find the Walrasian equilibria for a pure exchange economy where agents' ($A$ and $B$) preferences and endowments are given by:
$u_A = x_A + y_A$
$u_B = 2 ...
- 2,196
5
votes
1
answer
625
views
How to find the contract curve when both agents have linear utilities?
I'm trying to solve the following excercise:
Find the contract curve for an exchange economy where agents' ($A$ and $B$) preferences and endowments are given by:
$u_A = x_A + y_A$
$u_B = s x_A + y_A$
$...
- 2,196
2
votes
0
answers
50
views
Relation between complements and substitutes (for multiple goods)
I am a little bit curious about the following problem:
If we have multiple goods (at least 3 or more)... And we know that $x_1$ and $x_2$ are substitutes and $x_1$ and $x_3$ are also substitutes, does ...
- 730
3
votes
1
answer
431
views
A utility function (neither perfect substitues nor perfect complements) which stems from a CES f. and leads to gross complements or gross substitutes
So the most prominent preferences are perfect substitutes, perfect complements and cobb-douglas preferences. Perfect complements and perfect substitutes are extreme cases and I was asked whether there ...
1
vote
0
answers
66
views
Perfect substitutes mathematical definitions not equivalent
Statement: Consider goods $X$ and $Y$ (and we denote the quantities of by the same notation) such that they are perfect substitutes with the substitution ratio $1:n$.
Assume the basic axioms ...
- 242
1
vote
1
answer
85
views
Example of a (not quasi-linear) production function whose inputs are not perfect substitutes but are not asymptotic at the axes
I'm looking for an example of a family of production functions indexed by, say, rho, where the inputs become closer and closer to perfect substitutes as rho approaches 1, and yet, the marginal product ...
- 153
1
vote
1
answer
227
views
Contradictory FOC and maximizing solution
I have to maximize the following function -
$\max_{x \in (0,1)} (((p_1x)^{2r} + (p_2(1-x))^{2r})/2)^{1/r}$
where, $p_1$ and $p_2$ are drawn from uniform distribution [0,1] and are considered to be ...
- 499
5
votes
1
answer
2k
views
Perfect substitutes and Lagrange
How does one solve utility maximization of perfect substitutes using Lagrangian function?
Consider the problem
$$\max_{x,y} ax +by $$
subject to the constraint that
$$px + qy \leq I$$
where $a,b,p,q,...
- 3,286