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

Daniel Friedman and Sákovics, József
Authors registered in the RePEc Author Service: József Sákovics

No 2011-61, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

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)
Date: 2011
New Economics Papers: this item is included in nep-mic and nep-upt
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Citations: View citations in EconPapers (1)

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