The marginal utility of money: A modern Marshallian approach to consumer choice

József Sákovics and Daniel Friedman

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: We reformulate neoclassical consumer choice by focusing on lambda, the marginal utility of money. As the opportunity cost of current expenditure, lambda is approximated by the slope of the indirect utility function of the continuation. We argue that lambda can largely supplant the role of an arbitrary budget constraint in partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive approach to consumer choice.

Keywords: budget constraint; separability; value for money (search for similar items in EconPapers)
JEL-codes: D01 D03 D11 (search for similar items in EconPapers)
Pages: 31
Date: 2011-07
New Economics Papers: this item is included in nep-cba, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: The marginal utility of money: A modern Marshallian approach to consumer choice (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:209

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