Benchmark two-good utility functions
AbstractBenchmark two-good utility functions involving a good with zero income elasticity and unit income elasticity are well known. This paper derives utility functions for the additional benchmark cases where one good has zero cross-price elasticity, unit own-price elasticity, and zero own price elasticity. It is shown how each of these utility functions arises from a simple graphical construction based on a single given indifference curve. Also, it is shown that possessors of such utility functions may be seen as thinking in a particular sense of their utility, and may be seen as using simple rules of thumb to determine their demand.
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Bibliographic InfoPaper provided by Utrecht School of Economics in its series Working Papers with number 07-09.
Length: 20 pages
Date of creation: 2007
Date of revision:
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- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
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