Dynamic Model of the Individual Consumer

Craig McLaren ()

No 201507, Working Papers from University of California at Riverside, Department of Economics

Abstract: This paper presents an alternate formulation of consumer theory that allows the consumer to be modeled as acquiring his/her goods dynamically, i.e. through a series of incremental decisions based on the outcomes of their predecessors. The model begins with the assumption that the consumer knows his /her Marginal Rates of Substitution (MRS), and defines a utility-like quantity in terms of their integral. The model is developed using the mathematics of vector analysis, which clarifies the intuition of what such integrals mean and provides a simple and useful means of expressing the convexity of indifference surfaces. A concept of marginal demand is introduced to capture the difference in the mix of goods a consumer would procure, were he/she to acquire them incrementally rather than through a single, utility maximizing decision

Keywords: Dynamic Consumer Theory; Integrability; Convex Indifference Surface; Engle’s Law; Antonelli Conditions; Marginal Demand; Willingness to Pay; Contingent Valuation; Vector Analysis (search for similar items in EconPapers)
JEL-codes: C50 C60 D11 D50 (search for similar items in EconPapers)
Pages: 21 Pages
Date: 2015-07
New Economics Papers: this item is included in nep-upt
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://economics.ucr.edu/repec/ucr/wpaper/201507.pdf First version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:201507

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