Duality theorems, Microeconomics

Assignment Help:

Duality Theorems:

The relationship between the direct and indirect utility functions may be described by a set of duality theorems. The following illustrative theorems are provided without proof. 

Theorem 1: Let f be the finite regular strictly quasi-concave increasing function which obeys the interior assumption (the utility for a commodity combination in which one or more quantities is zero is lower than the utility for any combination in which all quantities are positive). The g determined by equation (c) is a finite regular strictly quassi-convex decreasing function for positive prices. 

Theorem 2:  Let g be a finite regular strictly quassi-convex decreasing function in positive prices. The h determined by equation (g) is a finite regular strictly quassi-concave increasing function. 

Theorem 3: Under the above assumptions 

h(q1,...,qn) = g[V1(q1,...,qn),..., Vn(q1,...,qn)] and

g(q1,..., qn) = h[D1(q1,..., qn),..., D1(q1,..., qn)] 

The direct utility function determined by the indirect is the same as the direct utility function that determined the indirect. 

Duality in consumption forges a much closer link between demand and utility functions for the purposes of empirical demand studies. It is sometimes possible to go from demand functions to the indirect utility function by using Roy's identity, and then to the corresponding direct utility function. Duality is also useful in comparative statics analysis. Homotheticity, separability, and additivity each have counterparts for the indirect utility function. Consequently, many theoretical analyses can be conducted in terms of either the direct or indirect utility function, whichever is more convenient.  


Related Discussions:- Duality theorems

Indifference curve, what is indifference curve''s theory and application

what is indifference curve''s theory and application

Lnternational trade, state 3 major assumptions which a production posibilit...

state 3 major assumptions which a production posibility is based

Point elasticity of demand, Point Elasticity of Demand - For large pric...

Point Elasticity of Demand - For large price changes (such as 20%), value of elasticity will depend upon where price and quantity lies on demand curve. - Point elasticity me

Production function, A competitive firm produces output using three fixed f...

A competitive firm produces output using three fixed factors and one variable factor. The firm’s short-run production function is q = 154x – 5x2, where x is the amount of variable

Econ, Draw a Production Possibilities Frontier with consumer goods on the v...

Draw a Production Possibilities Frontier with consumer goods on the vertical axis and capital goods on the horizontal axis. Show how the PPF will shift if the production of capita

Why have these economies converged, Why Have These Economies Converged? ...

Why Have These Economies Converged? By and large economies which have converged are those which belong to OECD: the Organization for Economic Cooperation and Development that w

Iso, what is an iso curve

what is an iso curve

What caused the productivity slowdown, What caused the productivity slowdow...

What caused the productivity slowdown?  Observers have pointed to 4 factors--Oil prices, baby boom, increased problems of economic measurement and environmental protection expe

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