Generalized marginal rate of substitution in multiconstraint consumer’s problems and their reciprocal expenditure problems
UNIVERSAL IDENTIFIER: http://hdl.handle.net/11093/3333
EDITED VERSION: http://link.springer.com/10.1007/s13209-011-0037-8
UNESCO SUBJECT: 5399 Otras Especialidades económicas
DOCUMENT TYPE: article
The aim of this paper is to explore several features concerning the generalized marginal rate of substitution (GMRS)when the consumers utility maximization problem with several constraints is formulated as a quasi-concave programming problem. We show that a point satisfying the first order sufficient conditions for the consumer’s problem minimizes the associated quasi-convex reciprocal cost minimization problems. We define the GMRS between endowments and show how it can be computed using the reciprocal expenditure multipliers. Additionally, GMRS is proved to be a rate of change between different proportion bundles of initial endowments. Finally, conditions are provided to guarantee a decreasing GMRS along a curve of initial endowments while keeping the consumer’s utility level constant.
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