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Results tagged with Search options user 42

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

5
votes
In The Economic Approach to Human Behavior, Gary Becker said: The combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, for …
answered Dec 4 '17 by Herr K.
2
votes
I'm not sure what you mean by "shocking the preferences". But it's very easy to find an example in which the optimal solution is still at the corner after a (small) positive income shock. Suppose $u …
answered Feb 23 '17 by Herr K.
1
vote
One proxy for cardinal utility would be people's willingness to pay (WTP) for a particular product. One can estimate WTP using consumption data (e.g. from Amazon/eBay purchases), or elicit WTP using e …
answered Mar 14 '17 by Herr K.
2
votes
It's called reference-dependent preference, a notion belonging to the intersection of economics, psychology, and neuroscience. Here is a set of brief introductory slides on the concept
answered Mar 2 '17 by Herr K.
2
votes
$m(\mathbf p,\mathbf x)$ specifies the minimum amount of money required for a consumer to attain the same utility as consuming bundle $\mathbf x$, taking prices $\mathbf p$ as given. In other words, s …
answered May 24 '18 by Herr K.
2
votes
In general, one could use the following procedure to find UPF (in a two-person case): fix one person's utility at some arbitrary level, say $U_A=\bar u$ maximize the other person's (i.e. person $B$) …
answered Jun 18 '15 by Herr K.
1
vote
Consider the budget line with 2 goods: \begin{equation} p_xx+p_yy=m \quad\text{or}\quad y=\frac{m}{p_y}-\frac{p_x}{p_y}x, \end{equation} where the relative price is $\frac{p_x}{p_y}$. Suppose now b …
answered May 3 by Herr K.
3
votes
Note that the Marshallian demand function $x^*(p_x,p_y,I)$ is homogeneous degree zero in $(p_x,p_y,I)$ (see here for a proof). According to Euler's theorem for homogeneous function, it follows that \ …
answered Nov 21 '18 by Herr K.
1
vote
Consider a locally non-satiated preference represented by the utility function \begin{equation} u(x,y)=-(x-4)^2(y-2)^2 \end{equation} It is easy to verify that $u(4,2)=0>-9=u(1,3)$. Therefore $B$ is …
answered Mar 9 by Herr K.
2
votes
In general, any utility function that produces non-linear and downward sloping indifference curves will feature imperfect substitutability between goods. (By considering only goods, we're implicitly a …
answered Feb 19 by Herr K.
2
votes
Converting my comments to an answer: I think your answers to 1 and 2 are correct. For 3.1, your intuition that "as well off as" should be interpreted "indifferent" is correct, and indifferent is abou …
answered Feb 24 '16 by Herr K.
3
votes
(2) does not imply (1). Consider a utility function with "circular indifference curves", e.g. $u(x,y)=-(x-1)^2-(y-1)^2$. At the bliss point $(1,1)$, the function satisfies (2) but violates (1). (2) d …
answered Jun 9 by Herr K.