Chapter3TheConsumersProblem(高级微观经济学-上海财经大学沈凌).pdfVIP

Chapter 3: The Consumer’s Problem 3.A: Budget set • Consumption Bundles: x (x ,x ,xn )T , where x , i ∈N is the quantity of good 1 2 i i . Hence, X is R n . + • Properties of the consumption set X 1. Φ≠X 2. X is closed. 3. X is convex. 4. 0 ∈X n • Budget Set: { } is the set of all feasible consumption bundles for B x ∈R : Px ≤w p w , + the consumer who faces market prices P (p ,p p )∈R n and has wealth w . 1 2 n • Remark : market price ( P ) • Budget Set is nonempty ( why ? (0,0,…0) ), closed ( ? ) and bounded ( all prices are strictly positive ) 3.B: Utility function • Definition 3.1: A real-valued function u : R n →R is called a utility function + representing the preference relation ≿, if for all x , y ∈X , u(x) ≥u(y ) ⇔ x ≿ y. • Theorem 3.2: A preference relation ≿ can be represented by a utility function only if it is rational. [Figure 1.1] 1 • Axiom 3: Continuity. (Mas-colell) The preference relation ≿ on X is continuous if it is preserved under ∞ limits. That is, for any sequence of pairs {(x n ,y n )} with x n ≿ y n for all n, n 1 x lim x n