ABSTRACT
DETERMINING MAXIMUM UTILITY CURVES FOR BUDGET CONSTRAINT LINE VARIATIONS
Journal: Matrix Science Mathematic (MSMK)
Author: Mehmet Pakdemirli
This is an open access article distributed under the Creative Commons Attribution License CC BY 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
DOI: 10.26480/msmk.01.2025.01.05
In the ordinal theory, maximum utility is achieved by determining the tangent point of the budget constraint line to one of the difference curves of equal satisfaction of a consumer. The model is a simplified model to determine the choices of buying two products such that maximum consumer satisfaction is reached. Market conditions frequently change due to inflation, deflation or price fluctuations. It may also happen that the individual income may change in time. In both cases, the budget constraint line shifts to the right or left. In this work, budget constraint line changes are modeled by assuming changes in the intercepts of the line. In the first scenario, the ratio of intercept changes are proportional in time while in the second scenario, the intercept changes are modeled by arbitrary functions of time. For both cases, by combining the optimal points, maximum utility curves are formed. Numerical examples are treated to outline the calculations.
Pages | 01-05 |
Year | 2025 |
Issue | 1 |
Volume | 9 |