Duality theorems, Microeconomics

Assignment Help:

Duality Theorems:

The relationship between the direct and indirect utility functions may be described by a set of duality theorems. The following illustrative theorems are provided without proof. 

Theorem 1: Let f be the finite regular strictly quasi-concave increasing function which obeys the interior assumption (the utility for a commodity combination in which one or more quantities is zero is lower than the utility for any combination in which all quantities are positive). The g determined by equation (c) is a finite regular strictly quassi-convex decreasing function for positive prices. 

Theorem 2:  Let g be a finite regular strictly quassi-convex decreasing function in positive prices. The h determined by equation (g) is a finite regular strictly quassi-concave increasing function. 

Theorem 3: Under the above assumptions 

h(q1,...,qn) = g[V1(q1,...,qn),..., Vn(q1,...,qn)] and

g(q1,..., qn) = h[D1(q1,..., qn),..., D1(q1,..., qn)] 

The direct utility function determined by the indirect is the same as the direct utility function that determined the indirect. 

Duality in consumption forges a much closer link between demand and utility functions for the purposes of empirical demand studies. It is sometimes possible to go from demand functions to the indirect utility function by using Roy's identity, and then to the corresponding direct utility function. Duality is also useful in comparative statics analysis. Homotheticity, separability, and additivity each have counterparts for the indirect utility function. Consequently, many theoretical analyses can be conducted in terms of either the direct or indirect utility function, whichever is more convenient.  


Related Discussions:- Duality theorems

Variable and total cost curve , Variable and Total cost curve    ...

Variable and Total cost curve    * Consequently (from the table which is given): - MC initially decreases with increasing returns  0 through 4 units of output

Members quota in imf, Member's Quota in IMF  Quota represents the subs...

Member's Quota in IMF  Quota represents the subscription by a member country to the capital fund of the IMF. Quotas are fixed for each country, taking into account such factor

Policy implications - structure of national income , Policy Implications: ...

Policy Implications: The expansion of the services sector  has wider implications for population, employment, and trade prospects of the economy, some of which are as follows:

Production function, Given the cost function as C=0.3Q3 -2Q2 + 13Q + 25, fi...

Given the cost function as C=0.3Q3 -2Q2 + 13Q + 25, find the supply function.uestion..

Perfect competition, Perfect competition: Perfect completion refers to...

Perfect competition: Perfect completion refers to the market structure in which there are a large number of relatively small firms, each firm having freedom of entry into and

Production, what is cob duglus production function?

what is cob duglus production function?

Baumol theory, appraise baumol`s sales revenue maximazation theory as an al...

appraise baumol`s sales revenue maximazation theory as an alternative of the firm

Calculate the mean, You are interested in the outcomes of the children in y...

You are interested in the outcomes of the children in your workload in general functioning and school performance, and whether they are related. As a result you decide to collect s

Please help, 1. Suppose the banking system has reserve of $750000, demand d...

1. Suppose the banking system has reserve of $750000, demand deposits of $2500000 and a reserve requirement of 20%. a. if the fed now purchases $125,000 worth of govt bonds from t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd