Consumer equilibrium -cardinal theory, Macroeconomics

Consumer Equilibrium:

According to our assumption for 'x' units consumption of the commodity, gross utility obtained by the consumer is U(x).But for this, the consumer must spend px.x units of money income if px be the price of the commodity 'x', which is given to the consumer. Since from assumption 6, λ represents fall in utility due to one unit fall in money income, the net utility of the consumer is given by 390_Consumer Equilibrium3.png and px are given to the consumer. So consumer's objective is to maximise N(x) by choosing 'x'. For that we take the first derivative of N(x) and set that equal to zero, 1564_Consumer Equilibrium.png.Or, we get ()1821_Consumer Equilibrium2.png From this first order condition, we can derive the optimum value of 'x' which is (say) x* = x*(px,λ). The second order condition for utility Maximisation requires 1870_Consumer Equilibrium1.png which is ensured by the assumption of falling MUx.  

758_Consumer Equilibrium4.png

Posted Date: 10/26/2012 2:17:46 AM | Location : United States







Related Discussions:- Consumer equilibrium -cardinal theory, Assignment Help, Ask Question on Consumer equilibrium -cardinal theory, Get Answer, Expert's Help, Consumer equilibrium -cardinal theory Discussions

Write discussion on Consumer equilibrium -cardinal theory
Your posts are moderated
Related Questions
Desired Aggregate Spending Desired aggregate spending refers to the volume of purchases of the currently produced goods and services that all spending units in the economy wish

Listed here are several examples of bad, or at least questionable, decisions. Evaluate the decision maker's approach or logic. In which of the six decision steps might the decision

.Clearly explain how net foreign investment links the market for loanable funds and the market for foreign currency exchange. Make sure you define net foreign investment in your an

Between 2007 and 2009 the U.S. economy experienced a severe recession. In an effort to stimulate the economy, the federal government passed a stimulus package. Explain the federal

If in some country personal consumption expenditures in a specific year are $50 billion, purchases of stocks and bonds are $30 billion, net exports are $-10 billion, government pur

The following table have data for a hypothetical open economy. The amount of investment spending is unknown. Question: What is the level of private savings? Question: Wh

1 . Use the AS/AD model to a . Demonstrate graphically and explain verbally the situation the US economy is currently in. b. In the diagram you drew for part (a) above, sh

Cd players are produced on an automated assembly line process. The standard cost of CD players is 150.00 per unit. The sales price is $300.00 per unit. To achieve a 10 percent mult


Suppose that the U.S. Department of Agriculture (USDA) administers the price floor for cheese, set at $0.17 per pound of cheese. (The price floor is officially set at $16.10 per hu