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2)
Week 5
Consumer Theory
(Jehle and Reny, Ch.2)
Serin ahin
Yldz Technical University
23 October 2012
Theorem 2.1
Constructing a Utility Function From an Expenditure
Function
Theorem 2.2
n+
A continuously dierentiable function x : R++
Rn+ is the
demand function generated by some increasing, quasiconcave
utility function if it satises
1
budget balancedness,
symmetry, and
negative semideniteness.
Axiom 1: Completeness.
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For any two gambles, g and g in G , either g g or g g .
Axiom 2: Transitivity.
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For any three gambles g , g , g in G , if g g and g g ,
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then g g .
Axiom 3: Continuity.
For any gamble g in G , there is some probability [0, 1],
such that
Monotonicity.
For all probabilities , [0, 1],
Axiom 4:
if and only if .
Axiom 5:
Substitution.
gamble
Axiom 6:
G.