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Convexity is an important topic in economics. [1] . In the Arrow–Debreu model of general economic equilibrium, agents have convex budget sets and convex preferences: At equilibrium prices, the budget hyperplane supports the best attainable indifference curve. [2] . The profit function is the convex conjugate of the cost function.
Non-convexity (economics) is included in the JEL classification codes as JEL: C65. In economics, non-convexity refers to violations of the convexity assumptions of elementary economics. Basic economics textbooks concentrate on consumers with convex preferences (that do not prefer extremes to in-between values) and convex budget sets and on ...
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By looking at the mathematical idea of concave and convex functions, we can gain some further insights into the economic properties of production functions. concave function A function of two variables for which the line segment between any two points on the function lies entirely below the curve representing the function (the function is ...
In economics, convex preferences are an individual's ordering of various outcomes, typically with regard to the amounts of various goods consumed, with the property that, roughly speaking, "averages are better than the extremes". The concept roughly corresponds to the concept of diminishing marginal utility without requiring utility functions .
Jan 1, 2017 · First Online: 01 January 2017. 151 Accesses. Abstract. Convexity is the modern expression of the classical law of diminishing returns, which was prominent in political economy from Malthus and Ricardo through the neoclassical revolution.
- Lawrence E. Blume
Oct 14, 2022 · From an intuitive point of view, convexity of preferences can be interpreted as a 'taste for diversification', that is a consumer prefers (at least weakly) bundles more 'balanced ' with respect to the quantity of each good to 'unbalanced' bundles, heavily weighted toward one commodity.
Jan 1, 2016 · 107 Accesses. 1 Citations. Abstract. The importance of convexity of preferences and technology to many of the fundamental propositions of neoclassical economics, both positive and normative, is evidenced by scores if not hundreds of essays in this Dictionary. Two such propositions will suffice here.
