On a Quantitative Definition of Affordability

Abstract

This paper introduces a definition of affordability based on the microeconomic theory of the consumer. We replace utility maximization with effectiveness maximization and discuss our conceptualization in terms of a cost-effectiveness framework. We convert our original ideas into a more useful degree (amount) of affordability (i.e., we ask not is it affordable? but How affordable is it?). This allows us to attach meaning to, and interest in, the concept of an affordability index or the measurement of the degree of affordability.