Cost Minimization and Utility Maximization
Consider the following standard problem in the theory of demand: Find x∗ ≥ 0 so as to max u(x) subject to 〈x, p〉 ≤ ω where 〈x, p〉 is the inner product of the n-dimensional commodity and price vectors, and ω > 0 and u are the consumer’s income and utility function respectively; this problem is here labelled max(p, ω).
KeywordsArrow corner Compensated demand Cost function Cost minimization and utility Duality Indirect utility function Linear programming Maximization
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