## Abstract

We reformulate neoclassical consumer choice by focusing on λ, the marginal utility

of money. As the opportunity cost of current expenditure, λ is approximated by the

slope of the indirect utility function of the continuation. We argue that λ can largely

supplant the role of an arbitrary budget constraint in partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive approach to consumer choice.

of money. As the opportunity cost of current expenditure, λ is approximated by the

slope of the indirect utility function of the continuation. We argue that λ can largely

supplant the role of an arbitrary budget constraint in partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive approach to consumer choice.

Original language | English |
---|---|

Publisher | Edinburgh School of Economics Discussion Paper Series |

Number of pages | 31 |

Publication status | Published - 18 Jul 2011 |

### Publication series

Name | ESE Discussion Papers |
---|---|

No. | 209 |

## Keywords

- budget constraint
- separability
- value for money
- D01
- D03
- D11