Expenditure minimization problem

In microeconomics, the expenditure minimization problem is the dual of the utility maximization problem: “how much money do I need to reach a certain level of happiness?”. This question comes in two parts. Given a consumer’s utility function, prices, and a utility target,

  • how much money would the consumer need? This is answered by the expenditure function.
  • what could the consumer buy to meet this utility target while minimizing expenditure? This is answered by the Hicksian demand function.

References

  1. ^Jonathan Levin, Paul Milgrom. “Consumer Theory” (PDF).
  • Mas-Colell, Andreu; Whinston, Michael & Green, Jerry (1995). Microeconomic Theory. Oxford: Oxford University Press. ISBN 0-19-507340-1.

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