# Questions tagged [utility]

Utility, or usefulness, is the (perceived) ability of something to satisfy needs or wants.

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### How do I derive the aggregate demand function given two utilities functions?

Assume that we have two people with the same utility function of $U_i = x^{1/2} + y^{1/2}$ where $i=1,2$ and $I_i$ is the income. Let $P_x$ denote price of good $x$ and $P_y$ denote price of good $y$. ...
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### How do I solve the Envelope Theorem condition in Microeconomics?

I am preparing myself for a MSc in Economics and don't understand why, according to the Envelope Theorem, when deriving a utility function $u(θ, q(θ), r(θ)) = B(q-r) - C(\frac{q}{θ})$, its derivative ...
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### When the global optimal is outside of the constraint set, what will be the demand?

$u:\mathbb R^n\to\mathbb R$ is a quasi-concave utility function so the indifference curves are convex. $a,b\in\mathbb R^n$ are two points. Our budget set is the (one-dimensional) segment $[a,b]$ that ...
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### What can be said about $(p − q)x_0=C$ from the information given?

A consumer consumes only two goods $x$ and $y$. The price of good $x$ in the local market is $p$ and that in a distant market is $q$, where $p > q$. However, to go to the distant market, the ...
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### robinson economy with production

Facing a little bit of a problem with this questions, did a similar one BUT the utility function was not linear and got MRS dependent on goods (was not just a number) - here I am at a loss. The ...
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### What is the difference between solving for utility maximization separately or aggregately?

I derived the Walrasian equilibrium for an economy of two consumers with their respective utility functions (u1, u2) and initial endowments but later on I am asked to maximize (u1+u2). Does anyone ...
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### What are the correct utility functions?

It is common to talk about utility functions. For example in a universe with only two goods, we might assume each person (or group of people) carries a function $u(x,y)$ in their heads. When offered ...
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### Indifference curve - Does $dU = 0$ hold in higher dimensions? / Problem of integrability

In two dimensions, we have on an indifference curve that $dU=0$. Does this apply to indifference objects in higher dimensions? I was thinking that if $dU > 0$, then one is moving to a higher ...
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### How do I figure out whether the ICs are convex or concave?

Question: Randy Ratpack hates studying both economics and history. The more time he spends studying either subject, the less happy he is. But Randy has strictly convex preferences. (a) Sketch an ...
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### Monotonic transformation of utility functions [duplicate]

Why taking monotonic transformation of a utility function does not change marginal rate of substitution?
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### Does Preference have a Hierarchy? A Silly Question

I have what is probably a very silly question, but I have gone down the rabbit hole and can’t get back out..... Is there is a hierarchy of preference, and within each level of choice do we reset the ...
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### How to calculate CRRA bounds from Holt and Laury (2002) type lottery?

Lottery is between: Option A: a certain choice of £5 Option B: £10 with probability 0.1 and £1 with probability 0.9 The probability of receiving £10 increases in each subsequent choice. How do I ...
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### Difference between direct and indirect utility

What is the difference between direct and indirect utility? Following the advanced microeconomics textbook Jehle and Reny I can not understand either the intuition or the math definition. It confuses ...
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### Why is the marginal utility of money assumed to be constant in Marshallian Theory of Consumer Behaviour

While studying the Marshallian Theory of Consumer Behaviour, I came across the assumption that the marginal utility of money is assumed to be constant. Can someone please explain why is this so?
This a person's budget line with various points, and their consumption, C*, and their endowment e, which is worth $5000 (unimportant). Also shows is their initial indifference curve. The difference ... 1answer 42 views ### Concavity of Cobb-Douglass Utility Function on Non-Open set My textbook argues that the Cobb-Douglass utility function$u=(x1)^a(x2)^b$with$a,b>0$and$a+b<1$is concave on$R2+\$ by computing the Hessian and showing it to be negative semidefinite for ...
Suppose I have a utility function of Cobb-Douglas form $$U(x, y) =x^{0.2}*y^{0.8}$$ I want to describe it in words. I would say like: The utility of consumer is captured by number of good x and ...