Utility maximization

8 important questions on Utility maximization

What is the slope of the budgetconstraint?

-Px/Py

How can you maximize the utilization?

MRS=Px/Py

What is the invidual's expenditure function?

Shows the minimal expenditures necessary to achieve a given utility lever for a particular set of prices
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What does the V function mean?

is the indirect utility function

optimal level of utility depends indirectly on prices and income

What is Engel's law?

The fraction of income spend on food decreases as income increases

CES utility function and Share equation

What is the income effect?

Change in optimal consumption choices associated with a change in income or purchasing power, holding relative prices constant

When is a good an inferrior good?

dXi/dI <0

What is the income expansion path?

Holding prices constant, the income expansion path is the locus of utility maximization tangencies

It does not have to be lineair
Does nog have to be positive sloped

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