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Expenditure function is an important theoretical method to study consumer behavior. Expenditure function is very similar to cost function in production theory. Dual to the utility maximization problem is the cost minimization problem [ 2 ] [ 3 ]
Unweighted, or "elementary", price indices only compare prices of a single type of good between two periods. They do not make any use of quantities or expenditure weights. They are called "elementary" because they are often used at the lower levels of aggregation for more comprehensive price indices. [2]
Formally, the expenditure function is defined as follows. Suppose the consumer has a utility function u {\displaystyle u} defined on L {\displaystyle L} commodities. Then the consumer's expenditure function gives the amount of money required to buy a package of commodities at given prices p {\displaystyle p} that give utility of at least u ∗ ...
While there are several ways to derive the Slutsky equation, the following method is likely the simplest. Begin by noting the identity (,) = (, (,)) where (,) is the expenditure function, and u is the utility obtained by maximizing utility given p and w.
This formula uses the expenditure method of national income accounting. ... Examples are air, water, land, etc. For reference, capital (K) is divided into four ...
Thus the left side gives GDP by the income method, and the right side gives GDP by the expenditure method. The GDP is given on the bottom line of both sides of the report. GDP must have the same value on both sides of the account. This is because income and expenditure are defined in a way that forces them to be equal (see accounting identity ...
In 2012, for example, the group invested $75 billion toward the International Monetary Fund to boost its lending power. But in recent years, BRIC has expanded to include other nations.
Many studies have used the AIDS system to determine the optimal allocation of expenditure among broad commodity groups, i.e., at high levels of commodity aggregation. In addition, the AIDS system has been used as a brand demand system to determine optimal consumption rates for each brand using product category spending and brand prices alone.