E1.1 Explain briefly why the assumption of concavity of the utility function can be dispensed with. _______________________________________________ Answer: Utility is an ordinal measure, i.e., you can apply any monotonic transformation to any given utility function and still it would be as good as a representation of the individual’s preferences as the original function. Concavity is not a property that survives a (strongly convex) transformation: for example, transform u(x) to Exp u(x) . What matters is that the utility function is quasi‐concave.

不明白的是，边际效用递减不是意味着效用曲线是concave的么？