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Finding (,) is the utility maximization problem. If u is continuous and no commodities are free of charge, then x ( p , I ) {\displaystyle x(p,I)} exists, [ 4 ] but it is not necessarily unique. If the preferences of the consumer are complete, transitive and strictly convex then the demand of the consumer contains a unique maximiser for all ...
In philosophy, Pascal's mugging is a thought experiment demonstrating a problem in expected utility maximization. A rational agent should choose actions whose outcomes, when weighted by their probability, have higher utility. But some very unlikely outcomes may have very great utilities, and these utilities can grow faster than the probability ...
This is a corner solution as the highest possible IC (IC 2) intersects the budget line at one of the intercepts (x-intercept). [1] In mathematics and economics, a corner solution is a special solution to an agent's maximization problem in which the quantity of one of the arguments in the maximized function is zero. In non-technical terms, a ...
It is a solution to the utility maximization problem of how the consumer can maximize their utility for given income and prices. A synonymous term is uncompensated demand function , because when the price rises the consumer is not compensated with higher nominal income for the fall in their real income, unlike in the Hicksian demand function .
The satisfiability problem, also called the feasibility problem, is just the problem of finding any feasible solution at all without regard to objective value. This can be regarded as the special case of mathematical optimization where the objective value is the same for every solution, and thus any solution is optimal.
The problem of finding the optimal decision is a mathematical optimization problem. In practice, few people verify that their decisions are optimal, but instead use heuristics and rules of thumb to make decisions that are "good enough"—that is, they engage in satisficing.
A consumer's indirect utility (,) can be computed from their utility function (), defined over vectors of quantities of consumable goods, by first computing the most preferred affordable bundle, represented by the vector (,) by solving the utility maximization problem, and second, computing the utility ((,)) the consumer derives from that ...
The welfare maximization problem is an optimization problem studied in economics and computer science. Its goal is to partition a set of items among agents with different utility functions , such that the welfare – defined as the sum of the agents' utilities – is as high as possible.