A mathematical discussion on a new outlook of consumer behaviour theory: A case study on ces functional form

The consumer behaviour theory is not a new one. There are so many theories such as Marshallian, Hicks-Allen Indifference Curve and Samuelson’s Revealed Preference theory and so on. But all these theories are based upon certain assumptions. The validity of these theories depends upon the rationality of these assumptions. The assumption of utility measurement i.e. whether utility is ordinal or cardinal is a debatable one. The Constant Elasticity of Substitution (CES) function is also not a new one. Recent theories developed Duality in Consumption, Linear Expenditure Function, application of Roy’s identity, Shepherd’s Lemma, Euler’s theorem etc. Our paper concentrates much on these areas in the light of CES utility function to reach the consumer in an equilibrium position and tries to find out a relation between consumer theory and production theory. We tried to establish a single theory to analyse the consumer behaviour and the behaviour of the firm such that one is the dual of the other. Lastly, in this paper we tried to establish a valid relation between Marginal Utility of Money Income of a Consumer and Marginal Cost of a Firm.