The Application of Lagrange Multipliers in Consumer Choice Theory

Petr Mach ()
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Petr Mach: University of Finance and Administration

ACTA VSFS, 2022, vol. 16, issue 1, 63-75

Abstract: This article deals with the consumer choice theory developed by Irving Fisher, Francis Edgeworth, Vilfredo Pareto, and John Hicks. A three-dimensional utility function is presented as an alternative to indifference curves. In mainstream textbooks, the indifference curves together with the budget constraint are used to find the optimum of a consumer graphically at a point where the budget line is a tangent line to an indifference curve. In this article, a vertical cross-section of the three-dimensional utility function and the Lagrange multipliers are applied to find the optimum of a consumer directly from the three-dimensional utility function subject to the budget constraint.

Keywords: consumer choice; consumer optimum; indifference curves; three-dimensional utility function (search for similar items in EconPapers)
JEL-codes: B13 B21 C31 D11 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:prf:journl:v:16:y:2022:i:1:p:63-75

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