中微课件ch04章节幻灯片.pptVIP

* An income tax that collected the same amount would shift the budget constraint to I’ I’ The Lump Sum Principle Quantity of x Quantity of y A B U1 U2 Utility is maximized now at point C on U3 U3 C * Indirect Utility and theLump Sum Principle If the utility function is Cobb-Douglas with ? = ? = 0.5, we know that So the indirect utility function is * Indirect Utility and theLump Sum Principle If a tax of $1 was imposed on good x the individual will purchase x*=2 indirect utility will fall from 2 to 1.41 An equal-revenue tax will reduce income to $6 indirect utility will fall from 2 to 1.5 * Indirect Utility and theLump Sum Principle If the utility function is fixed proportions with U = Min(x,4y), we know that So the indirect utility function is * Indirect Utility and theLump Sum Principle If a tax of $1 was imposed on good x indirect utility will fall from 4 to 8/3 An equal-revenue tax will reduce income to $16/3 indirect utility will fall from 4 to 8/3 Since preferences are rigid, the tax on x does not distort choices * Expenditure Minimization Dual minimization problem for utility maximization allocating income in such a way as to achieve a given level of utility with the minimal expenditure this means that the goal and the constraint have been reversed * Expenditure level E2 provides just enough to reach U1 Expenditure Minimization Quantity of x Quantity of y U1 Expenditure level E1 is too small to achieve U1 Expenditure level E3 will allow the individual to reach U1 but is not the minimal expenditure required to do so A Point A is the solution to the dual problem * Expenditure Minimization The individual’s problem is to choose x1,x2,…,xn to minimize total expenditures = E = p1x1 + p2x2 +…+ pnxn subject to the constraint utility = U1 = U(x1,x2,…,xn) The optimal amounts of x1,x2,…,xn will depend on the prices of the goods and the required utility level * Expenditure Function The expenditure function shows the minimal expenditures necessary to achieve a g