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

Revenue, draw the supernormal curve

draw the supernormal curve

Oligopoly, what makes it differ from other market structures

what makes it differ from other market structures

Managerial economics, what is budget line?show the shift in the budget line...

what is budget line?show the shift in the budget line

Price/earnings (p/e) ratio, Price/Earnings (P/E) Ratio This is a measur...

Price/Earnings (P/E) Ratio This is a measure of an organization investment potential. Literally, a P/E ratio is how much a share is worth per dollar of earnings. The price-earn

Central problem of economy, explain the central problem of economy with p...

explain the central problem of economy with production possibility curve?

Explain the assumptions of a perfectly competitive market, Question 1: ...

Question 1: i) Elaborate on how CPI is used to calculate inflation and what are the limitations of such a measure? ii) Growth is always beneficial. Discuss iii) Explain

Unemployment rate, Unemployment Rate A measure of labor force utilizati...

Unemployment Rate A measure of labor force utilization the unemployment rate is equal to the number of people which is unemployed as a percentage of the total labor force.

Incidence tax, If the inverse demand curve is p=120-Q and the marginal cost...

If the inverse demand curve is p=120-Q and the marginal cost is constant at 10, how does charging the monopoly a specific tax of r=10 per unit affect the monopoly optimum and the w

Elasticity of demand, "Assume the local fixed telecommunications company is...

"Assume the local fixed telecommunications company is a monopoly. It costs the company €2 per month to give voice messages service to a customer. Elasticity of demand for voice mes

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