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

Supply and demand, Explain the meaning of the statment "coffee and tea are ...

Explain the meaning of the statment "coffee and tea are close substitutes".

Achievements of bretton woods instittutions, ACHIEVEMENTS OF BRETTON WOODS ...

ACHIEVEMENTS OF BRETTON WOODS INSTITTUTIONS: Some of the important achievements of the BW Institutions can be summarised as follows: 1) International reserves have increa

Explain the terms trade and the balance of trade, Distinguish between the t...

Distinguish between the terms of trade and the balance of trade. Basic explanation of the terms of trade as the average price of exports in relation to the average price of imp

Economic system, what is the definition of economic system?

what is the definition of economic system?

Market segmentation, what are the uncontrolled variables you think may affe...

what are the uncontrolled variables you think may affect the segment of your camera

Describe trade unions and collusion among employees, Trade union can also p...

Trade union can also pay a useful role in improving the wages of the workers without causing adverse effects on employment. This case which is intensely associated with the idea of

Assignment, what is the theory of second best ? prove the theorem with the ...

what is the theory of second best ? prove the theorem with the help of a diagram .

Strengthening the financial instruments, Strengthening the Financial Instru...

Strengthening the Financial Instruments - rationale in era of globalisation: With this in view, following suggestions can be made: i) Finance must be conditioned on a poli

Evaluate the demand function, Lab Exercise 1. Taco Del Mar has completed a ...

Lab Exercise 1. Taco Del Mar has completed a study of weekly demand for its tacos in Washington State's regional markets.  The study developed the following demand function: Q =

Explain the economic principle, Various studies have concluded that the dem...

Various studies have concluded that the demand for movie cinema attendance is responsive to advertising.  A study of one company, with movie cinemas in three neighbouring towns, sh

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