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Nolan Miller

Notes on Microeconomic Theory

Nolan H. Miller September a few, 2003

Contents

1 The Economic Strategy 2 Consumer Theory Basics 2 . you 2 . two 2 . a few 2 . some Commodities and Budget Units............................... Demand Functions..................................... Three Limitations on Client Choices......................... you 5 five 8 9

A First Evaluation of Client Choices.......................... twelve 2 . some. 1 Comparison Statics................................ 11

2 . your five

Requirement one particular Revisited: Walras' Law.......................... 10 2 . five. 1 2 . 5. 2 2 . your five. 3 installment payments on your 5. four 2 . a few. 5 installment payments on your 5. 6th 2 . 5. 7 2 . 5. eight What's the Funny Equals Sign Everything regarding?.................... 12 Back to Walras' Regulation: Choice Response to a Change in Wealth........ 13 Testable Effects............................... 14

Brief summary: How Do We Get In which We Are?.................. 12-15 Walras' Legislation: Choice Respond to a Change in Price.............. 15 Comparative Statics when it comes to Elasticities................... of sixteen Why Take the time?.................................... 17 Walras' Law and Changes in Riches: Elasticity Form............. 18

2 . 6

Necessity 2 Revisited: Demand is usually Homogeneous of Degree Actually zero........... 18 2 . 6. one particular Comparative Statics of Homogeneity of Level Zero.............. nineteen

2 . six

Requirement several Revisited: The Weak Rule of Exposed Preference.......... 20 2 . 7. 1 installment payments on your 7. 2 Compensated Alterations and the Slutsky Equation................ twenty-one Other Houses of the Alternative Matrix................... twenty-five 26

several The Traditional Method of Consumer Theory 3. you

Basics of Preference Contact............................... 27

i actually

Nolan Miller 3. two

Notes in Microeconomic Theory

ver: August. 29, the year 2003

From Tastes to Utility................................ 32 three or more. 2 . 1 3. 2 . 2 Electricity is an Ordinal Idea........................... 33 Some Basic Properties of Utility Capabilities................... 34

several. 3

The Utility Maximization Problem (UMP)........................ 39 3. 3. 1 3. several. 2 a few. 3. 3 3. 3. 4 several. 3. your five Walrasian Demand Functions and the Properties............... 44 The Lagrange Multiplier.............................. 46 The Indirect Utility Function and Its Real estate................ 47 Roy's Identity.................................... forty-nine The Roundabout Utility Function and Wellbeing Evaluation............. 40

3. 5

The Spending Minimization Issue (EMP)..................... 52 3. some. 1 3. 4. two 3. 5. 3 several. 4. 4 3. four. 5 several. 4. six 3. 5. 7 three or more. 4. almost 8 A First Be aware on Mix and match.............................. 53 Homes of the Hicksian Demand Functions and Expenses Function... 56 The Relationship Between Expenditure Function and Hicksian Demand. fifty nine The Slutsky Equation............................... sixty one Graphical Romantic relationship of the Walrasian and Hicksian Demand Capabilities.. 63 The EMP plus the UMP: Summary of Interactions.............. 64 Welfare Evaluation................................. 66 Bringing It All Together.............................. 71 73

4 Topics in Consumer Theory 4. you 4. two

Homothetic and Quasilinear Electricity Functions...................... 73 Aggregation......................................... 75 4. installment payments on your 1 ...

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