Two Plus Two Newer Archives  

Go Back   Two Plus Two Newer Archives > Other Topics > Science, Math, and Philosophy
FAQ Community Calendar Today's Posts Search

Reply
 
Thread Tools Display Modes
  #1  
Old 09-27-2007, 12:10 PM
shawny boy shawny boy is offline
Senior Member
 
Join Date: Nov 2004
Posts: 230
Default lambda in lagrangian != marginal utility of income?

so I have a simple maximization problem U(x,y) = x ^ 1/2 * y ^ 1/2, Px = 1, Py = 3, I = 100

my solution is x = 75, y = 8.333 and lambda = 0.0577

now here is where I am confused and would appreciate any help. the utility U(75,8.3333) = 25 @ I = 100 when I increase I to 101 I find that U(75.75, 8.41666) = 25.25 which would seem to indicate that the marginal utility of income for the system is in fact 0.25.

I see that the sum of the marginal utilities dU(x+y) = lambda, but they are both WAY different from the output of the function.

Please help me understand this.

Thanks in advance. Shawn
Reply With Quote
Reply


Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -4. The time now is 06:52 AM.


Powered by vBulletin® Version 3.8.11
Copyright ©2000 - 2024, vBulletin Solutions Inc.