Complementarity, Necessity and Preferences


Complementarity, Necessity and Preferences

CII 3051

October 24, 2012 4:00 PM - 5:00 PM

Abstract: Reducing a necessity to its lower limit causes the MRS to change rapidly creating inelastic demand and complementarity.  The analytic concept that defines necessity also underlies income and substitution effects allowing a reinterpretation of the Slutsky decomposition and providing a utility foundation for marginal revenue.  For three or more goods, a good is essential if adding it to the system decreases the elasticity of substitution.

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