A NOTE ON SHADOW PRICES

Jasminka Sohinger () and Ilko Vrankic ()
Additional contact information
Jasminka Sohinger: University of Zagreb
Ilko Vrankic: University of Zagreb

Economic Thought and Practice, 2012, vol. 21, issue 1, 3-20

Abstract: In this paper we examine the method of Lagrange multipliers within the context of consumer optimal choices. The action of multipliers on constraints in the utility maximization problem is represented graphically as a multiplied distance between expenditures and income in the primal, and as a multiplied distance between total and given utilities in its dual. Based on those graphical representations we offer new interpretations of the optimal values of Lagrange multipliers as well as of the consumer's ordinal properties. Comparative statics results are confirmed analytically and placed within the general framework of non-linear relationships among variables that are relevant in general equilibrium analysis.

Keywords: Lagrange multipliers; line of force; line of indifference; equilibrium; concavity and quasi-concavity; comparative static (search for similar items in EconPapers)
JEL-codes: C61 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hrcak.srce.hr/index.php/clanak/124621 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:avo:emipdu:v:21:y:2012:i:1:p:3-20

Ordering information: This journal article can be ordered from
Economic Thought and Practice, University of Dubrovnik, Branitelja Dubrovnika 29, 20000 Dubrovnik
https://emip.unidu.hr/

Access Statistics for this article

Economic Thought and Practice is currently edited by Nebojsa Stojcic

More articles in Economic Thought and Practice from Department of Economics and Business, University of Dubrovnik Contact information at EDIRC.
Bibliographic data for series maintained by Nebojsa Stojcic ().