New answers tagged

3 votes
Accepted

If utility function is homogenous of order 1, then partial derivatives of demand function are equal

For ease of notation, let's take the setting of two goods $x_1$ and $x_2$. The case is similar when there are more than two goods. If utility is homogeneous, the demand functions are homogeneous of ...
tdm's user avatar
  • 10.3k
2 votes
Accepted

If utility function is convex, what can be said about preference relation?

Concave utility functions are quasiconcave while convex utility functions are quasiconvex. If $U()$ is convex then $-U()$ is concave and represents the 'opposite' preferences, so if you believe the ...
Giskard's user avatar
  • 28.7k
2 votes

Showing UMP and EMP do not exhibit duality if the assumption of local non-satiation is absent

A counterexample would work as well. Consider the utility function $U(x) = 0$, and the budget constraint $1 \cdot x \leq 1$. The solution $x^* = 1$ is feasible and maximizes utility, but it does not ...
Giskard's user avatar
  • 28.7k
0 votes

Understanding consumption units normalisation by $u^\prime (c) $

The derivative $u'(c)$ is defined as the limit of fractions of the form $\frac{\Delta u}{\Delta c}$, so $\frac{u(c)}{u'(c)}$ is of the form $\frac{u\,\Delta c}{\Delta u}$, which in terms of units ...
VARulle's user avatar
  • 6,550
0 votes

Change in Hicksian Demand of an Inferior Good when changing Utility

For the good in question, let $d^m(p,m)$ denote the Marshallian demand and let $d^h(p,u)$ denote the Hicksian demand, where $p$ is the price vector, $m$ is income, and $u$ is utility. Since the good ...
smcc's user avatar
  • 604
0 votes
Accepted

MCQ on income and substitution effects

According to me bread can be both normal or inferior given the extent of the income effect. Since substitution effect is always negative, increase in he price of bread reduces its demand. Since its ...
Abhilasha Saxena's user avatar

Top 50 recent answers are included