Chaiyuth_ConsumerTheory

Chaiyuth_ConsumerTheory - Notes on Microeconomic Theory...

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Notes on Microeconomic Theory Nolan H. Miller September 5, 2003
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Contents 1 The Economic Approach 1 2C o n s um e rT h e o r yB a s i c s 5 2 .1 Commod i t i e sandBudg e tS e t s............................... 5 2 .2 D emandF un c t ion s ..................................... 8 2 .3 Th r e eR e s t r i c t sonCon sum e rCho i c e s......................... 9 2 .4 AF i r s tAna ly s i so fCon e i c e s .......................... 10 2 .4 .1 Compa ra t iv eS ta t i c s ................................ 11 2 .5 R equ i r em en t1R ev i s i t ed :W a l s ’L aw. ......................... 2 .5 .1 Wha t sth eF unnyEqua l sS ignA l lAbou t ?.................... 12 2.5.2 Back to Walras’ Law: Choice Response to a Change in Wealth . . . . . . . . 13 2 .3 T e s tab l eImp l i ca t s ............................... 14 2 .4 Summ a ry :HowD idW eG e tWh e r eW eA r e ? .................. 15 2 .5 W a l s ’Law :Cho i c e spon s etoaChang einP r i c e .............. 2 .6 Compa t t i c sinT e rm fE la s t i c i t i e s................... 16 2 .7 WhyB o th e r ?.................................... 17 2.5.8 Walras’ Law and Changes in Wealth: Elasticity Form . . . . . . . . . . . . . 18 2.6 Requirement 2 Revisited: Demand is Homogeneous of Degree Zero. . . . . . . . . . . 18 2.6.1 Comparative Statics of Homogeneity of Degree Zero . . . . . . . . . . . . . . 19 2 .7 R i r t3R i s i t :Th eakAx iomo fR ea l edP r e f e r c e.......... 20 2 .7 .1 Comp sa t edChang e sandth lu t skyEqua t ion. ............... 21 2.7.2 Other Properties of the Substitution Matrix . . . . . . . . . . . . . . . . . . . 25 3 The Traditional Approach to Consumer Theory 26 3 .1 B a s i c fP r e f e r c e t 27 i
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Nolan Miller Notes on Microeconomic Theory ver: Aug. 29, 2003 3 .2 F romP r e f e r en c e stoU t i l i ty . ............................... 32 3 .2 .1 U t i l i tyi sanO rd ina lCon c ep t........................... 33 3 .2 Som eBa s i cP rop e r t i e so fU t i l i tyF un c t ion s ................... 34 3 .3 Th eU t i l i tyMax im i za t ionP rob l em(UMP )........................ 39 3 .3 .1 W a l ra s ianD em andF c t sandTh e i rP e r t i e s............... 44 3 .2 Th eLag rang eMu l t ip l i e r.............................. 46 3 eInd i r e c tU t i l i c t ionandI t sP e r t i e s ................ 47 3 .4 Roy sId t i ty. ................................... 49 3.3.5 The Indirect Utility Function andW e l fa r eEv a lua t ion . ............ 50 3 .4 Th eExp end i tu r eM in i t l em(EMP )..................... 52 3 .4 .1 AF i r s tNo t eonDua l i ............................. 53 3.4.2 Properties of the Hicksian Demand Functions and Expenditure Function . . . 56 3.4.3 The Relationship Between the Expenditure Function and Hicksian Demand . 59 3 eS lu t skyEqua t .............................. 61 3.4.5 Graphical Relationship of the Walrasian and Hicksian Demand Functions . . 63 3 .6 Th eEMPandth eUMP :Summa ryo fR e la t sh s .............. 64 3 .7 W e l r a t ion. ................................ 65 3 .8 B r ing ingI tA l lT og e th e 71 4 Topics in Consumer Theory 73 4 .1 Hom o e t i candQua s i l ea rU t i l i c t s...................... 73 4 .2 Agg r ega t ........................................ 75 4 .1 Th eGo rm anF o rm. 76 4 r eg a t eD andandAgg r t eW l th. ................... 78 4 .3 Do e sind iv idua lWARPimp lyag g r t eWARP ?................ 80 4 .4 R r e s ta t eCon sum e r s............................. 82 4 eCompo s i t eComm od i tyTh eo r em. .......................... 84 4.4 So Were They Just Lying to Me When I Studied Intermediate Micro? . . . . . . . . 85 4 .5 Con sump t ionW i thEndowm t s ............................. 87 4 .5 eLabo r -L e i su r eCho i c e............................. 90 4 .6 Con t ionOv e rT e.................................. 93 4 .6 .1 D i s coun t ingandP r e s tV a e .......................... 94 ii
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Nolan Miller Notes on Microeconomic Theory ver: Aug. 29, 2003 4 .6 .2 Th eTw o -P e r iodM od e l .............................. 95 4 .3 Th eMany e r e landT im eP r e f e r en c e.................. 97 4 .4 Th eF i sh e rS epa ra t ionTh eo r em. ......................... 101 5 Producer Theory 104 5 .1 P rodu c t ionS e t s....................................... 105 5 .1 rop e r t i e so fP c t e t s........................... 106 5.1.2 Pro f tMax i za t ionw i thP c t e t s.................... 110 5.1.3 Properties of the Net Supply and Pro f tF un c t ion s ............... 112 5 .4 ANo t eonR
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Chaiyuth_ConsumerTheory - Notes on Microeconomic Theory...

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