Expenditure Minimization Problem

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

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