Hot answers tagged

4 votes

Confusion on deriving Walrasian price changes using IFT

First, there is a slight mistake in your first order condition as $x_2$ needs to be in the numerator and $x_1$ in the denominator. The two first order conditions can be written as: $$ \alpha p_2 x_2 - ...
tdm's user avatar
  • 11.2k
3 votes
Accepted

Example of a utility function with cross-price effects in demand functions

If the demand functions do not depend on the prices of other goods, then they looks something like this: $$ D_i(I,p_i) = \frac{\alpha_i I}{p_i} $$ were $\alpha_i$ is the share of the consumer's total ...
Giskard's user avatar
  • 29.2k
1 vote

Finding the competitive equilibrium in an exchange economy with two perfect complements

Given a pure-exchange economy with $u_A(x_A,y_A)=\min(x_A,2y_A)$, $u_B(x_B,y_B)=\min(2x_B,y_B)$ Endowment of A is $(k_X,k_Y)$ and of B is $(12-k_X,12-k_Y)$ Set of feasible allocations is $\mathcal{F}...
Amit's user avatar
  • 8,366
1 vote

Questions about demand curve as marginal benefit curve

Yes, it does. The "marginal benefit", measured in monetary units, is just the WTP (willingness-to-pay) for the next unit of the good. This WTP will decrease only slightly from unit to unit, ...
VARulle's user avatar
  • 6,725
1 vote

Utility functions that exhibit nonconstant elasticity of marginal utility

Consider a function like $u(c) = e^{\gamma c}$, where $\gamma > 0$. Corresponding Marginal Utility is $\text{MU}=\dfrac{du}{dc}=\gamma e^{\gamma c}$. We get that the elasticity of marginal utility ...
Amit's user avatar
  • 8,366
1 vote

Cobb-Douglas utility function

They don't have to, look: $U(x,y) = x^2y^2$ is Cobb-Douglas type, but the exponents sum up to four. It is also true that $U()$ represents the same preferences as $\hat{U}(x,y) = \sqrt{xy}$, where the ...
Giskard's user avatar
  • 29.2k
1 vote

Convex preference and convex utility

Q1: What are the differences between convex preferences and covex utility function They have different definitions, which imply different things. From Wikipedia Formally, a preference relation $\...
Giskard's user avatar
  • 29.2k

Only top scored, non community-wiki answers of a minimum length are eligible