In microeconomics, the expenditure minimization problem is another perspective on the utility maximization problem: "how much money do I need to reach a certain level of happiness?". This question comes in two parts. Given a consumer's utility function, prices, and a utility target,
- how much money would the consumer need? This is answered by the expenditure function.
- what could the consumer buy to meet this utility target while minimizing expenditure? This is answered by the Hicksian demand function.
Read more about Expenditure Minimization Problem: Expenditure Function, Hicksian Demand Correspondence
Famous quotes containing the words expenditure and/or problem:
“The bread-winner must toil as in the fruitless effort of a troubled dream while the expenditure of an uneducated wife discounts the income in the lack of understanding to discern the broad possibilities of an intelligent economy.”
—Anna Eugenia Morgan (1845–1909)
“Like the effects of industrial pollution ... the AIDS crisis is evidence of a world in which nothing important is regional, local, limited; in which everything that can circulate does, and every problem is, or is destined to become, worldwide.”
—Susan Sontag (b. 1933)