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Shephard's lemma is a result in microeconomics having applications in the theory of the firm and in consumer choice. [1] The lemma states that if indifference curves of the expenditure or cost function are convex, then the cost-minimizing point of a given good with price is unique.
As a result of this, the solution to the consumer's constrained maximization problem will not (generally) be an interior solution, and as such one must check the utility level in the boundary cases (spend entire budget on good x, spend entire budget on good y) to see which is the solution.
The shift in consumer demand for an inferior good can be explained by two natural economic phenomena: The substitution effect and the income effect. These effects describe and validate the movement of the demand curve in (independent) response to increasing income and relative cost of other goods. [9]
An increasing percentage of the federal budget became devoted to mandatory spending. [3] In 1947, Social Security accounted for just under five percent of the federal budget and less than one-half of one percent of GDP. [8] By 1962, 13 percent of the federal budget and half of all mandatory spending was committed to Social Security. [3]
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
In economics, a budget constraint represents all the combinations of goods and services that a consumer may purchase given current prices within their given income. Consumer theory uses the concepts of a budget constraint and a preference map as tools to examine the parameters of consumer choices .
In these situations, the intertemporal budget constraint is effectively an equality constraint. In an intertemporal consumption model, the sum of utilities from expenditures made at various times in the future, these utilities discounted back to the present at the consumer's rate of time preference , would be maximized with respect to the ...
The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves.It analyzes how consumers maximize the desirability of their consumption (as measured by their preferences subject to limitations on their expenditures), by maximizing utility subject to a consumer budget constraint. [1]