Book contents
- Frontmatter
- Contents
- List of tables and figures
- Preface
- PART ONE CONSUMER DEMAND ANALYSIS
- PART TWO SEPARABILITY AND AGGREGATION
- PART THREE WELFARE AND CONSUMER BEHAVIOR
- PART FOUR EXTENSIONS AND APPLICATIONS
- 10 The quality of goods and household production theory
- 11 Labor supply
- 12 The consumption function and intertemporal choice
- 13 The demand for durable goods
- 14 Choice under uncertainty
- References
- List of notation
- Name index
- Subject index
10 - The quality of goods and household production theory
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- List of tables and figures
- Preface
- PART ONE CONSUMER DEMAND ANALYSIS
- PART TWO SEPARABILITY AND AGGREGATION
- PART THREE WELFARE AND CONSUMER BEHAVIOR
- PART FOUR EXTENSIONS AND APPLICATIONS
- 10 The quality of goods and household production theory
- 11 Labor supply
- 12 The consumption function and intertemporal choice
- 13 The demand for durable goods
- 14 Choice under uncertainty
- References
- List of notation
- Name index
- Subject index
Summary
To newcomers to economics, utility theory often appears as a vacuous subject. One of our chief concerns in this book is to show how appropriate assumptions on preferences and the constraints households face are required in different contexts to put flesh on utility theory, to gain insights into particular kinds of behavior, and to justify particular empirical procedures. We have already had many good examples of this, ranging from the selection of easy to handle but general functional forms for Engel curves and demand functions to assumptions that permit groups of goods to be treated as one good and groups of households to be treated as a single household. The borderline between whether restrictions are to be placed on preferences or on the constraints faced by the household is sometimes a subtle one. For example, in Chapter 8, we saw that to be able to place a welfare interpretation on cost-of-living comparisons across households with different compositions, we had to assume that the differences in preferences between households could be fully characterized through certain parameters which could be given a price or cost interpretation. In one example, the cost function common to all households was defined on “corrected” prices, which are the product of the actual market prices and parameters that increase with household size and reflect the higher “equivalent prices” larger households have to pay for their consumption goods.
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- Economics and Consumer Behavior , pp. 243 - 272Publisher: Cambridge University PressPrint publication year: 1980
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