Budget constraint of a firm and economic theory

1996 ◽  
Vol 8 (1) ◽  
pp. 137-153
Author(s):  
M. Kiyoshi Kuga
Keyword(s):  
Economic Theory ◽  
Budget Constraint

scholarly journals The Econometrics of Kinked Budget Constraints

1990 ◽  
Vol 4 (2) ◽  
pp. 119-139 ◽  
Author(s):  
Robert Moffitt
Keyword(s):  
Economic Theory ◽  
Piecewise Linear ◽  
Applied Econometrics ◽  
Budget Constraint ◽  
Budget Constraints ◽  
Transfer Programs ◽  
Demand Functions ◽  
Number Of Segments ◽  
Block Pricing

In the last several years, a branch of applied econometrics has developed that is devoted to the development of techniques for the estimation of demand and other functions when the budget constraint is “piecewise-linear,” or “kinky”—that is, when the constraint consists of a number of segments joined together at kink points. Such constraints most frequently arise from government tax and transfer programs. But kinked constraints sometimes arise in nongovernment contexts, a well-known example being the block pricing schedule commonly set by utilities and volume discounting in general. Kinked budget constraints create two difficulties. First, changes in tax and transfer schedules can have unexpected effects that can be exactly the opposite in sign to those expected from economic theory. Examples of this phenomenon are given below. Second, kinked budget constraints make the estimation of demand functions quite difficult.

Preferences and Utility

2011 ◽  
Author(s):  
Yves Balasko
Keyword(s):  
Economic Theory ◽  
Utility Maximization ◽  
Budget Constraint ◽  
Utility Functions ◽  
Consumer Theory ◽  
Definition Of ◽  
Early Phases

Classical consumer theory is essentially the theory of utility maximization under a budget constraint. This theory starts with the definition of consumers' preferences. In classical consumer theory, preferences are assumed to be transitive, complete, monotone, and convex. These preferences can then be represented by utility functions. The latter are mathematically easier to handle than preferences. Another reason for being interested in utility functions goes back to the early phases of economic theory. Then, it was thought that utility functions could be used as a measure of consumer's satisfaction or utility. This chapter is devoted to a presentation of the basic issues regarding preferences and their representability by utility functions.

Die deutsche “Schuldenbremse”: Ein wirksames Instrument zur Vermeidung eines Bailout?

2009 ◽  
Vol 58 (3) ◽  
Author(s):  
Friedrich Gröteke ◽  
Karsten Mause
Keyword(s):  
Economic Theory ◽  
Federal Government ◽  
Fiscal Federalism ◽  
Budget Deficit ◽  
Budget Constraint ◽  
Debt Brake ◽  
Tax Autonomy ◽  
Fiscal Rule ◽  
German Constitution ◽  
Effective Instrument

AbstractIn 2009, a new “debt brake” has been introduced into the German constitution. According to this fiscal rule, the federal government has to limit its annual net borrowing from the year 2016 on to a maximum of 0.35 percent of GDP; the German Laender must not take out new loans from the year 2020. Based on findings of the economic theory of fiscal federalism, this paper argues that the new debt brake - within the existing institutional framework - seems not to be an effective instrument to ban the risk of a bailout. For example, the Laender which de jure face the toughest budget constraint have no sufficient tax autonomy in order to react to a looming budget deficit through tax increases.

The neoclassical firm

2020 ◽  
pp. 233-262
Author(s):  
David M. Kreps
Keyword(s):  
Economic Theory ◽  
Objective Function ◽  
Profit Maximization ◽  
Budget Constraint ◽  
Neoclassical Economic ◽  
Technological Capabilities ◽  
Neoclassical Economic Theory ◽  
Inputs And Outputs

This chapter assesses the neoclassical firm. In neoclassical economic theory, the firm is an entity, just like the cois maximized subject to a nsumer. The consumer has an objective function, utility, which budget constraint and any constraints on feasible consumption. The firm has an objective function, profit, which it maximizes subject to constraints imposed by its technological capabilities. Chapter 2 focused on the consumer's objective function; the budget set constraint was not discussed much. For the neoclassical firm, the reverse is typically true. There is a lot of discussion about how to represent the technological capabilities of the firm and very little about profit maximization. The chapter describes ways to model the firm's technological capabilities, before studying the firm's behavior, assuming it chooses inputs and outputs to maximize its profits.

Budget constraint of a firm and economic theory

1996 ◽  
Vol 8 (1) ◽  
pp. 137-153
Author(s):  
Kiyoshi Kuga
Keyword(s):  
Economic Theory ◽  
Budget Constraint
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