STSTEER

Deriving Demand

The module in this section tests an agent's ability to solve a constrained utility maximization problem to derive a demand function—relying on the results of Properties of Utility Functions. We test the canonical classes of demand functions, check the duality of Marshallian demand and Hicksian demand, and ask the agent to derive these demand functions from first principles.

Elements

  1. Derivation of Marshallian Demand

    Deriving the Marshallian demand function for a good from a Cobb-Douglas utility function and a budget.

  2. Derivation of Hicksian Demand from Expenditure Minimization

    Deriving the compensated (Hicksian) demand for a good from a utility function and a target utility level.

  3. Duality of Hicksian Demand

    Recognising that the cheapest way to reach the utility a consumer can afford is the bundle that maximises utility on the budget.