In microeconomics

Microeconomics

Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

, the expenditure function describes the minimum amount of money an individual needs to achieve some level of utility, given a utility function and prices.

Formally, if there is a utility function  that describes preferences over L commodities, the expenditure function

says what amount of money is needed to achieve a utility if prices are set by .
This function is defined by


where


is the set of all bundles that give utility at least as good as .

See also

• Expenditure minimization problem
  Expenditure minimization problem
  In microeconomics, the expenditure minimization problem is another perspective on the utility maximization problem: "how much money do I need to reach a certain level of happiness?". This question comes in two parts...
  
  
• Hicksian demand function
  Hicksian demand function
  In microeconomics, a consumer's Hicksian demand correspondence is the demand of a consumer over a bundle of goods that minimizes their expenditure while delivering a fixed level of utility. If the correspondence is actually a function, it is referred to as the Hicksian demand function, or...
  
  
• Utility maximization problem
  Utility maximization problem
  In microeconomics, the utility maximization problem is the problem consumers face: "how should I spend my money in order to maximize my utility?" It is a type of optimal decision problem.-Basic setup:...