Benchmark Two-Good Utility Functions

Kris De Jaegher

No 07-09, Working Papers from Utrecht School of Economics

Abstract: Benchmark two-good utility functions involving a good with zero income elasticity and unit income elasticity are well known. This paper derives utility functions for the additional benchmark cases where one good has zero cross-price elasticity, unit own-price elasticity, and zero own price elasticity. It is shown how each of these utility functions arises from a simple graphical construction based on a single given indifference curve. Also, it is shown that possessors of such utility functions may be seen as thinking in a particular sense of their utility, and may be seen as using simple rules of thumb to determine their demand.

Keywords: Benchmark Utility Functions; Rules of Thumb (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (2)

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Journal Article: BENCHMARK TWO‐GOOD UTILITY FUNCTIONS* (2008)
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