Just as a demand function can be derived from the process of utility _______________, given the consumer's income and the prices, an expenditure function can be derived by a process of income _______________, given the predetermined level of utility for the consumer and the prices.
A) minimization, maximization
B) maximization, maximization
C) maximization, minimization

Question

Quizplus · Accepted Answer

A demand function is derived by minimizing the consumer's expenditure for a given level of utility, while an expenditure function is derived by maximizing the consumer's utility for a given level of expenditure or income. Therefore, the correct answer is maximization, minimization.

Just as a Demand Function Can Be Derived from the Process