maximizing utility with quasilinear demand

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  • Опубликовано: 21 авг 2024
  • Instead of the usual cobb-douglas, here I illustrate maximizing utility with a quasi-linear utility function.

Комментарии • 49

  • @Lumchuck
    @Lumchuck 8 лет назад +3

    Thank you so much for this. Such a good explanation. Thanks for not skipping any of the maths either, it really helps to go through step by step.

  • @akashkalyana8295
    @akashkalyana8295 8 лет назад +9

    Not many people shows how to solve numericals,thanks alot.

    • @BurkeyAcademy
      @BurkeyAcademy  8 лет назад +1

      You are welcome- if you have any special requests, let me know!

    • @akashkalyana8295
      @akashkalyana8295 8 лет назад +1

      yes sir,if u can post a video about numericals on phillips curve and inflation and stuff,its just nowhere to be found,i'll really appreciate it.

    • @akashkalyana8295
      @akashkalyana8295 8 лет назад

      numericals on unemployment,inflation and phillips curve is what i want.

    • @BurkeyAcademy
      @BurkeyAcademy  8 лет назад +1

      I don't do much Macroeconomics, but if you have a specific request for a topic maybe I'll do one. Here is an interesting Phillips curve one I made: ruclips.net/video/EM0SYtDGv3w/видео.html

    • @akashkalyana8295
      @akashkalyana8295 8 лет назад +1

      Thanx sir,you are really doing it to help people,i really appreciate it.

  • @jamespatrick9191
    @jamespatrick9191 2 года назад

    thank you so much, this helped me in my microeconomics course! btw has anyone told u that u sounded like Iron Man?

  • @mikegargaro
    @mikegargaro 7 лет назад +2

    That cleared everything up for me, thank you so much.

  • @tausal1
    @tausal1 7 лет назад +2

    Thank you so much! Extremely helpful.

  • @divyanshiraj4416
    @divyanshiraj4416 2 года назад

    Thanks a lot..

  • @namratamishra6909
    @namratamishra6909 3 года назад

    But the optimal bundle doesn't satisfy the budget line
    If we put optimal bundle in budget line it turns out to be 5.125 which is greater than 4
    Can you please explain this part

  • @grup9499
    @grup9499 7 лет назад +1

    Thank you so much! This is a great video! :)

  • @TheArkus2002
    @TheArkus2002 6 лет назад

    It doesn't seem like there's any solution where you will actually have a corner solution where you consume only y and no x. Mathematically, it seems like there is only one type of corner solution in this problem, where you consume only x and no y. With any positive prices and income, setting MRS = px/py results in a positive value of x. Am i missing something? As you keep increasing px in your example, you continue to get a positive x value, albeit closer and closer to 0. So there is now way we actually get to the corner. I can see it graphically, but not mathematically. When I graph this quasilinear function on desmos.com the indifference curve becomes nearly parallel with the y-axis, up to 3 decimal places, an then reaches 10. But presumably you could take this value to a closer and closer value to 10- and never actually reach it. This would mean that x is always positive.
    The way this was taught to me was that you will always consume some of X, but your decision to consume some of Y depends on the amount of income.
    i.e.
    MRS = 1/2*SQRT(x) = px/py, and therefore X* = px^2/4py^2 (a positive number, provided px and py are positive).
    I = px.X + py.Y, so
    I = px.(py^2/4px^2) + py.Y, and
    I = py^2/4px + py.Y,
    Y* = I/py - py/4px (a negative or positive number)
    So we need for Y > 0 to be am interior solution, otherwise we will just spend all of our money on X, and none on Y, i.e. [m/px,0]
    Y>0
    I/py - py/4px > 0
    I > py^2/4px
    So the problem is solved in the fashion
    X*,Y* = [px^2/4py^2, I/py - py/4px], if I > py^2/4px
    and [m/px, 0], otherwise.

    • @BurkeyAcademy
      @BurkeyAcademy  6 лет назад +1

      You are right, thanks for the comment! I hadn't thought about the math very carefully. but since the MRS is 1/(2sqrt(x)), as z goes toward zero the slope goes to infinity. So, no matter how steep the budget line is, you will always buy some x.

  • @WheelhouseHockey
    @WheelhouseHockey 7 лет назад

    Does the rule that slope of the indifference curve is steeper than the slope of the budget line mean that this is a corner solution for other types of common utility functions as well?

    • @BurkeyAcademy
      @BurkeyAcademy  7 лет назад

      Hmmm. Just to make sure we are on the same page, exactly what rule are you talking about? I generally thing of the rule being that if the solution is not feasible, e.g. involves a negative amount of x or y, that indicates a corner solution where the solution is to spend all money on the good with the positive value. It has been a while since I made this video, but I don't think I know of a "rule" about the relative slopes. Do you mean steeper at the x intercept? If the corner solution were on the y axis, the budget line would be steeper. But in general, any utility function that has indifference curves touching the x or y axis could have a corner solution- bot a Cobb-Douglas cannot.

  • @abbymelvin890
    @abbymelvin890 3 года назад

    Is the marginal utility of x increasing ? Is the marginal ulitity of y diminishing ? And the Marginal Rate of Substitution diminishing ?

    • @BurkeyAcademy
      @BurkeyAcademy  3 года назад

      Perhaps this will help: ruclips.net/video/vtoo-ikL-g0/видео.html

  • @david_felipe
    @david_felipe 7 лет назад

    When we talk about MRSx,y we use UMy/UMx and the other way MRSy,x is equal to UMx/UMy. It´s that correct? Thanks for the response

    • @BurkeyAcademy
      @BurkeyAcademy  7 лет назад +1

      You have it backwards. Though I think the notation is a bit confusing and backwards myself (don't blame me! ☺). MRSx,y =MUx/MUy, and means "how much y you would be willing to give up to get one more x".

  • @elferi
    @elferi 7 лет назад

    great lecture, sir. may i know what are the book you refers to for the lecture? thanks

    • @BurkeyAcademy
      @BurkeyAcademy  7 лет назад

      None really... but when I recorded this I was teaching out of Besanko and Braeutigam's Microeconomics. So, this probably relates to one of their end of chapter exercises.

  • @LeandroRobert1
    @LeandroRobert1 8 лет назад

    Good video. But I don't understand something: why didn't you use the lagrangian method? Thanks.

    • @BurkeyAcademy
      @BurkeyAcademy  8 лет назад

      There are two common ways it is taught, this is one of them. Here is a video where I explain how the two methods are really the same thing: ruclips.net/video/O3MFXT7AdPg/видео.html

    • @LeandroRobert1
      @LeandroRobert1 8 лет назад

      Ok, so langrangian method is suitable for quasilinear demands aswell?

    • @BurkeyAcademy
      @BurkeyAcademy  8 лет назад

      leandro8894
      Absolutely. Do the problem in this video using Lagrangian for practice, and see what happens.

    • @LeandroRobert1
      @LeandroRobert1 8 лет назад

      Please, correct me if I am wrong, but I think I can't actually "solve" it, since I have a function of X expressed in general terms, and I can't obtain a plain 'X' from it. That is because when I equalize the lagragians Multipliers, after setting the first orden conditions, I get f'(x)=px/py. The following step would be obtaining X=*something* and replace that in ∂L/∂ λ. But only by knowing what f(x) stands for (for instance Ln(x)), I would be able to solve for x.
      But still, I think I get the general idea. My only question is: You say that in quasilinear Functions, we obtain parallel indifference curves, with the same slope if X=Xo. Now, Given a Cobb-Douglas function, and a fixed value of X; If I move along the Y axis, do I get a different Slope value for each Indifference curve?

    • @BurkeyAcademy
      @BurkeyAcademy  8 лет назад

      For a cobb-douglas, you will get a different slope if you hold x constant, but change y. Easy way to see this: Let U=sqrt(xy). Then the MRS (slope of indifference curves)=y/x. Hold X=5, and increase Y, the slope goes 1/5, 2/5, 3/5,...

  • @emreyilmaz7641
    @emreyilmaz7641 6 лет назад

    I dont get how you made the MRS shouldn`t it be 1/( 2*square root (x) ) ?

    • @BurkeyAcademy
      @BurkeyAcademy  6 лет назад

      Yes, what you have is just another way to write what I have. .5=1/2, and x^.5 =sqrt(x).

    • @emreyilmaz7641
      @emreyilmaz7641 6 лет назад

      Thank you , i`m from germany and we don`t use that type of writing so i was confused

  • @gurnoorsingh4103
    @gurnoorsingh4103 6 лет назад

    is under root x+y is cobb douglas function

    • @BurkeyAcademy
      @BurkeyAcademy  6 лет назад

      Nope- think about it: You can always replace 1 x for 1 y and get the same utility. root(8+1) = root(7+2)=3. So, these are perfect complements with MRS=1.

    • @gurnoorsingh4103
      @gurnoorsingh4103 6 лет назад

      What about root X × Y

    • @BurkeyAcademy
      @BurkeyAcademy  6 лет назад

      Root(x*Y) = y^.5*y^.5, so ...

    • @gurnoorsingh4103
      @gurnoorsingh4103 6 лет назад

      Is it cobb Douglas or not

    • @BurkeyAcademy
      @BurkeyAcademy  6 лет назад +1

      Do you know what a Cobb-Douglas looks like? If you don't know, I have a video or two for that... I am a professor, not a do your homework for you service. ☺ You can look elsewhere for that, if you want to.

  • @rhea_khurana
    @rhea_khurana 7 лет назад

    Will quasilinear preferences always give corner solutions, or interior solutions are possible?

    • @BurkeyAcademy
      @BurkeyAcademy  7 лет назад +1

      In my first example there was an interior solution, so yes, it is possible. Just remember, that a corner solution is impossible with a Cobb-Douglas.

    • @rhea_khurana
      @rhea_khurana 7 лет назад

      BurkeyAcademy Another question: How do we know when we'll get a corner/interior solution?

    • @BurkeyAcademy
      @BurkeyAcademy  7 лет назад +1

      Good question! 1) If you get a negative solution for X or Y. 2) Another way we might be able to tell is if the slope of the budget line (Px/Py) is either greater than the MRS when Y=0, or less than the MRS when X=0. See if that makes sense to you- if not, let me know, and it might make an interesting video...

    • @rhea_khurana
      @rhea_khurana 7 лет назад +1

      BurkeyAcademy This makes complete sense. Thank you so much!

  • @anais5811
    @anais5811 2 года назад

    now i can do my pproblem sets in 32L

  • @anais5811
    @anais5811 2 года назад

    AM,AZING ONG