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Mathematical Economics - Marginal analysis in the consumer behavior theory

Marques, Jorge and Pascoal, Rui (2018): Mathematical Economics - Marginal analysis in the consumer behavior theory. Published in: in Proceedings of the 19th SEFI-MWG European Seminar on Mathematics in Engineering Education

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Abstract

In the neoclassical theory, the economic value of a good is determined by the benefit that an individual consumer attributes to the last ("marginal") unit consumed. Marginal analysis was introduced to the theory of value by William Jevons, Carl Menger and Léon Walras, the founders of marginalism. Since the so-called “marginalist revolution” of the 1870s, differential (or infinitesimal) calculus has been applied to the mathematical modelling of economic theories. Our goal is to present some consumer behavior models, their advantages and limitations, using the methodology of economic science. It should be emphasized that each (re)formulation is based on different economic principles: diminishing marginal utility, diminishing marginal rate of substitution and weak axiom of revealed preference.

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