Utility-expenditure duality, Microeconomics

Assignment Help:

Utility-Expenditure Duality:

Consider the minimisation of the  expenditures necessary to achieve a specified utility level. The solution for qi yields the compensated demand functions. If the solutions for qi are substituted in 491_Utility-Expenditure Duality.png one obtains the expenditure function E (p1,...,pn,U0), which gives the minimum expenditure necessary to achieve a given utility level. It is easy to show that E is homogeneous of degree one in prices and monotonically increasing in U0. It can also be shown that the expenditure function corresponding to a regular strictly quassi-concave utility function admitting no satiation is concave in prices. Finally, Shephard's lemma states  that the partial derivative of E with respect to the ith price is the ith compensated demand function. This can be shown as follows:   

1329_Utility-Expenditure Duality1.png

But the compensated demands are obtained by minimising expenditures for a given utility level U0; hence the change in total expenditures that is due to a small change in a price is zero. It follows that the second term above is zero and 

1028_Utility-Expenditure Duality2.png

The duality between utility and expenditure functions is formally identical to the duality between production and cost functions.


Related Discussions:- Utility-expenditure duality

What is black marketing, What is black marketing?  Black Marketing mean...

What is black marketing?  Black Marketing means hoarding of sure commodity to sell it at higher prices. But it is an illegal activity in the economy and makes artificial shorta

Production function curve, different types of production funtion and curve ...

different types of production funtion and curve given by different economist

Monopoly, if the inverse demand curve is p=120-Qand the marginal cost is co...

if the inverse demand curve is p=120-Qand the marginal cost is const ant at 10 ,

Preference toward risk, what is consumer''s choice involving risk.preferenc...

what is consumer''s choice involving risk.preference toward risk.

Quantity supply, factor influencing quantity supplied

factor influencing quantity supplied

Create a multi-dimensional arrays, Create a Document that displays informat...

Create a Document that displays information about cars. First, create a select with an id="make". It will not have any makes in the options until the page finishing loading. When t

Determine the benefits of increased openness in trade, The benefits of incr...

The benefits of increased openness in trade. Narrowly defined, trade openness is lowering trade barriers - facilitating increased imports - whereas focusing on international ex

Dimensions of unemployment, DIMENSIONS OF UNEMPLOYMENT: What is the le...

DIMENSIONS OF UNEMPLOYMENT: What is the level of unemployment in the country? According to the 1999-2000 Survey of NSSO, the number of unemployed has increased from 20.13 mill

Shortage/surplus, Students at XSU cannot register for english classes. Is t...

Students at XSU cannot register for english classes. Is this a situation of shortage or surplus of classes? Explain. Also would you expect market forces to do to tuition?

Formal and informal systems - mrp system, Formal and Informal systems  - M...

Formal and Informal systems  - MRP System Most production systems are full of 'pushes' and 'pulls'. The formal system issues orders, ie 'pushes'. The informal system tries to

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