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
Other articles related to "expenditure minimization problem, expenditure, problem":
... It can be defined in terms of the expenditure function with the Marshallian demand function The relationship between the utility function and Marshallian demand in the Utility Maximization Problem mirrors ... more than one commodity bundle that satisfies the expenditure minimization problem), then the demand is a correspondence, and not a function ...
Famous quotes containing the words problem and/or expenditure:
“Theology, I am persuaded, derives its initial impulse from a religious wavering; for there is quite as much, or more, that is mysterious and calculated to awaken scientific curiosity in the intercourse with God, and it [is] a problem quite analogous to that of theology.”
—Charles Sanders Peirce (1839–1914)
“To predict the behavior of ordinary people in advance, you only have to assume that they will always try to escape a disagreeable situation with the smallest possible expenditure of intelligence.”
—Friedrich Nietzsche (1844–1900)