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

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.

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Year of publication:	2011
Authors:	Friedman, Daniel ; Sákovics, József
Institutions:	Scottish Institute for Research in Economics (SIRE)
Subject:	budget constraint \| separability \| value for money

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Series:	SIRE Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series SIRE-DP-2011-61 Number 2011-61
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010607465