Mathematical presentation of utility maximisation, Microeconomics

Assignment Help:

Mathematical Presentation of Utility maximisation:

Consumer's objective is to maximise her utility by solving UMP. To solve UMP, we set the Lagrange function of the corresponding problem, which is,    L(x1, x2) = U(x1, x2) + λ (M-p1x1-p2x2) Our objective is to maximise this Lagrange function by choosing x1, x2 and λ. For that we differentiate the Lagrange function by x1, x2 and  λ, and set all equal to zero.  

 

547_Mathematical Presentation.png

is the slope of the indifference curve and  p1/p2 is the slope of the budget line. So, at equilibrium we have a slope of the indifference curve that is equal to the slope of the budget line. Again, from equation (f3) we get M = p1x1+p2x2, so budget equation holds with equality sign.   


Related Discussions:- Mathematical presentation of utility maximisation

Production, explain 6 factors that determine volume of production

explain 6 factors that determine volume of production

Microeconomics, I need help on MCQs on international trade and imperfect co...

I need help on MCQs on international trade and imperfect competetion

Why is the concept of scarcity relevant to both ldc and mdc, Why is the con...

Why is the concept of scarcity relevant to both LDC s and MDC s? All societies throughout time have wrestled with the basic economic conundrum of having needs that cannot be me

Explain the term economic efficiency, Explain the term economic efficiency?...

Explain the term economic efficiency?  Answer:   Economic Efficiency means full utilization of all available resources in economy i.e. to produce the needed amount of goods and

Bank for international settlements, Bank for International Settlements: An ...

Bank for International Settlements: An international financial regulatory organization based in Switzerland, Bernethat designs international regulations regarding capital adequacy

Marginal Cost, Can marginal cost be constant? If so, does this mean that ma...

Can marginal cost be constant? If so, does this mean that marginal cost are equal to average variable cost?

Demand Forecasting, what is demand forecasting and defines its techniques

what is demand forecasting and defines its techniques

Labor Economics, Sally recently finished her full-time training and receive...

Sally recently finished her full-time training and received certification as a nurse’s aid at the end of August. She sent out applications to prospective employers during the last

Demand and Supply changes, The price of oil increases because OPEC reduces ...

The price of oil increases because OPEC reduces oil production

Government, A government official announces a new policy. The country wishe...

A government official announces a new policy. The country wishes to eliminate its trade deficit, but will strongly encourage financial investment from foreign firms. Explain why su

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