1. Suppose that a representative individual has the following utility function U(x, y) = xªyb The price of good x is Php 40 and the price of good y is Php 20. The individual's income is Php 160. a. Find the Marshallian Demands and Indirect Utility function. Use the "Varian'

1. Suppose that a representative individual has the following utility function U(x, y) = xªyb The price of good x is Php 40 and the price of good y is Php 20. The individual's income is Php 160. a. Find the Marshallian Demands and Indirect Utility function. Use the "Varian'

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Suppose that a representative individual has the following utility function
U(x, y) = xªyß
The price of good x is Php 40 and the price of good y is Php 20. The individual's income is
Php 160.
a. Find the Marshallian Demands and Indirect Utility function. Use the "Varian"
solution to find the Marshallian Demands. Also, find the Expenditure function and
Hicksian Demands via the Duality theory and the Shephard's Lemma. Do not use the
prices and income given. Assume that a = 0.5 and ß = 0.5

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