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Dynamic Model of the Individual Consumer

Author

Listed:
  • Craig McLaren

    (Department of Economics, University of California Riverside)

Abstract

This paper presents an alternate formulation of consumer theory that allows the consumer to be modeled as acquiring his/her goods dynamically, i.e. through a series of incremental decisions based on the outcomes of their predecessors. The model begins with the assumption that the consumer knows his /her Marginal Rates of Substitution (MRS), and defines a utility-like quantity in terms of their integral. The model is developed using the mathematics of vector analysis, which clarifies the intuition of what such integrals mean and provides a simple and useful means of expressing the convexity of indifference surfaces. A concept of marginal demand is introduced to capture the difference in the mix of goods a consumer would procure, were he/she to acquire them incrementally rather than through a single, utility maximizing decision

Suggested Citation

  • Craig McLaren, 2015. "Dynamic Model of the Individual Consumer," Working Papers 201507, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:201507
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    File URL: https://economics.ucr.edu/repec/ucr/wpaper/201507.pdf
    File Function: First version, 2015
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    Cited by:

    1. Craig McLaren, 2015. "Existence and Stability of Dynamic Exchange Equilibria," Working Papers 201508, University of California at Riverside, Department of Economics.

    More about this item

    Keywords

    Dynamic Consumer Theory; Integrability; Convex Indifference Surface; Engle’s Law; Antonelli Conditions; Marginal Demand; Willingness to Pay; Contingent Valuation; Vector Analysis;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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