1. An agent consumes quantity (X1,X2) of goods 1 and 2. Here is his utility function:U (x1,x2) = x13x2, his budget constraint is: p1x1+p2x2=m.(a) Calculate the agent's Marshallian demand (x*, x*2).(b) Derive the agent's expenditure function.(c) Roy's identity for good 1 states that:aV(pl,p2, m)/х1* 3дV (р1, р2, т)amVerify this equation (you need not verify it for good 2).

Answered: Image /qna-images/answer/85a2e11b-5414-4982-aee7-69207faa88b0.jpg

1. An agent consumes quantity (x1,X2) of goods 1 and 2. Here is his utility function: U(x1,x2) = x1³x2, his budget constraint is: p1x1+p2x2=m. (a) Calculate the agent's Marshallian demand (x*1, x*2). (b) Derive the agent's expenditure function. (c) Roy's identity for good 1 states that: əv (p1, p2, m)/ap1 lap1 ƏV (p1,p2, m)/am x1* = Verify this equation (vou need not verify it for good 2).

1. An agent consumes quantity (x1,X2) of goods 1 and 2. Here is his utility function: U(x1,x2) = x1³x2, his budget constraint is: p1x1+p2x2=m. (a) Calculate the agent's Marshallian demand (x1, x2). (b) Derive the agent's expenditure function. (c) Roy's identity for good 1 states that: əv (p1, p2, m)/ap1 lap1 ƏV (p1,p2, m)/am x1* = Verify this equation (vou need not verify it for good 2).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

3. Let there be two goods x and y with prices px and py respectively, and let M be the consumer's income. Let the consumer's preferences be represented by the utility function min(2x, y). Find the consumer's expenditure function. Note: you cannot use the Lagrange method as the utility function is not differentiable - but you have used the min U = utility function before. (4)
Please no written by hand solutions
A consumer's utility function is given by (x₁+x₂); with MU and MU wherex, and x, denote the quantities of good 1 and good 2 consumed. 1 2 Calculate the utility maximizing quantity of good 1 if income is 397, price for good 1 is 6 and price for good 2 is 8. Please round your answer to the closest integer.
3) The utility function of a consumer who consumes quantities x and y of two goods is defined by the expression U(x, y)=√xy subject to the constraint 7x+3y=84 where $84 is the consumer's overall budget. Assuming marginal utilities U,,U>0, maximize the utility function of the consumer. What are the optimal values of x, y and U(x,y) ?
6. Consider a consumer with the utility function u(x,, x2) = In(x,) + x2 and the budget constraint p, x, + PP2X2 = m. Derive the consumer's demand functions for x, and x2.