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WILLINGNESS TO PAY: The price or dollar amount that someone is willing to give up or pay to acquire a good or service. Willingness to pay is the source of the demand price of a good. However, unlike demand price, in which buyers are on the spot of actually giving up the payment, willingness to pay does not require an actual payment. This concept is important to benefit-cost analysis, welfare economics, and efficiency criteria, especially Kaldor-Hicks efficiency. A related concept is willingness to accept.
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CONSTRAINED UTILITY MAXIMIZATION The process of obtaining the highest possible level of utility from the consumption of goods or services, under given restrictions, when the highest overall level of utility cannot be reached. The notion of constrained utility maximization is a modification of the more general utility maximization assumption. It is based on the recognition that consumers might be restricted from achieving the absolute maximum level of utility. The primary restrictions tend to be the amount of income available relative to price paid. Constrained utility maximization generally does reach the peak of the total utility curve.
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YELLOW CHIPPEROON
[What's This?]
Today, you are likely to spend a great deal of time at a going out of business sale looking to buy either a half-dozen helium filled balloons or a packet of address labels large enough for addresses of both the sender and the recipient. Be on the lookout for door-to-door salesmen.
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This isn't me! What am I?
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Lewis Carroll, the author of Alice in Wonderland, was the pseudonym of Charles Dodgson, an accomplished mathematician and economist.
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"The way employees treat customers reflects the manner in which they're treated by management. " -- James Perkins, president, Cornell University
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AEA
American Economic Association
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