Definitions

# Isoelastic utility

In economics, the isoelastic function for utility, sometimes isoelastic utility function, is used to express utility in terms of consumption.

It is

$u\left(c\right) = frac\left\{c^\left\{1-eta\right\}\right\}\left\{1-eta\right\}$

where $c$ is consumption, $u\left(c\right)$ the associated utility, and $eta$ a constant (if $eta=1$ it is conventional to use the limiting value, viz $u\left(c\right)=log c$). Stern states that the value of $eta$ "is essentially a value judgement".

The isoelastic function is used in the Stern review, page 52.

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