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exam1_review

Intermediate Microeconomics: A Modern Approach, Seventh Edition

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Preferences: xy f Consumption Set: { , , ,} xyz Utility Function U( ) > U( ) iff y x f Budget Set (, ) { | } Bpm X px m =∈ x Budget Exhaustion Weak Monotinicity + Strong Convexity Complete, Reflexive Transitive, Continuous 12 x, 1 2 11 2 2 Consumer Maximization Problem Max ( , ) Subject to: x Ux x px m + =

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Utility Function (Ordinal) Utility Maximization Expenditure Minimization (, ) m a x () x Marshallian Demand Function (, ) ( , ) : Homogenous of Degree 0, Continuous, non increasing in P x i i Vpm Ux p m vpm p xpm m =⋅ = = () m i n (, ) s t x p = i i (,) m i n x s t () (,) Hicksian Demand Function h ( , ) Homogeneous of degree 1 in p Continuous, nondecreasing in p h ( , ) :Homogeneous of degree 0 in p i epu p Ux u pu p = ⋅> = Monotonic Transformations (,(, ) ) (,(,) ) ) ) ii epvpm m vpepu u x pepu h pu hpvpm = = = =
(,) (,(, ) (,(,) ) (,) (, ) ii i jj i i i SlutskyMatrix hpu xpepm xpepu epu pp e p u p so xpm x ppm ∂∂ =+ ∂∂∂ =− 11 12 21 22 1 2 : Matrix Symmetry is Neg SemiDef p p h pu ⎡⎤ ⎢⎥ ⎣⎦ = 1 2 0, p →≤ =

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Looking for Corners x y p p x y p p Multiple Price Vectors at the Kink x=y Possible Interior solutions x y p p No Corner Solutions
WAPM and GARP BT WT x : p 1, (2,8) Selected Comparison: (4,1),(3,6) y Line p = =

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WAPM and GARP BT WT x : p 1, (2,8) Selected Comparison: (6,4),(3,8) y Line p = =
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exam1_review - Preferences x f y Complete Reflexive...

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