economics terms

Jensen's Inequality

If g() is a convex function and X is a random variable with nonzero variance, then

        E(g(X)) > g(E(X)).

If f() is a concave function and X is a random variable with nonzero variance, then

        E(g(X)) < g(E(X)).

The latter form is the basis for relating risk aversion to curvature in utility functions.


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Economics Terms

Arbitrage Pricing
Arbitrage Profit
Average Cost
Balance of Payments
Budget Constraint
Call Option
Concave Function
Consumer Surplus
Consumption Function
Convex Function
Deadweight Loss
Demand Curve
Econometrics
Economic Agent
Economic Model
Economics
Economics Textbook
Elasticity
Endogenous
Endogenous Technical Change
Equilibrium
Exchange Rate
Exogenous
Expectations Hypothesis
Federal Funds (Fed Funds) Rate
Fixed Exchange Rate
Floating Exchange Rate
Frictional Unemployment
Gross Domestic Product (GDP)
Income Effect
Income Elasticity
Indifference Curve
Interest Rate
Intertemporal Substitution
Jensen's Inequality
Macroeconomics
Marginal Cost
Marginal Product
Marginal Utility
Microeconomics
Monopoly
Optimizing Behavior
Perfect Competition
Phillips Curve
Price Elasticity
Producer Surplus
Production Function
Production Possibility Frontier
Put Option
Recession
Reservation Wage Rate
Risk Aversion
Structural Unemployment
Substitution Effect
Supply Curve
Taylor Rule
Technological Growth
Term Structure
Theory of the Consumer
Theory of the Firm
Unemployment Rate
Utility Function
Velocity of Money
Widget
Yield Curve