2. A consumer has the utility function u = (x₁ − €₁)ª (x₂ − ₂)", a+b=1 U = (X1C1) (X2 C2), a+b=1 where the care interpreted as minimum subsistence levels of ,i = 1,2 xi,i=1,2. Derive the consumer's Hicksian demand functions and expenditure function.
2. A consumer has the utility function u = (x₁ − €₁)ª (x₂ − ₂)", a+b=1 U = (X1C1) (X2 C2), a+b=1 where the care interpreted as minimum subsistence levels of ,i = 1,2 xi,i=1,2. Derive the consumer's Hicksian demand functions and expenditure function.
Chapter6: Demand Relationships Among Goods
Section: Chapter Questions
Problem 6.9P
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Please Answer the first part
Transcribed Image Text:2. A consumer has the utility function
u = (x₁c₁) ª (x₂-C₂), a+b=1
U = (x1 - C1) (x2 - C2)b, a+b=1
where the ci are interpreted as minimum subsistence levels of i, i = 1,2
xi,i=1,2. Derive the consumer's Hicksian demand functions and expenditure
function.
3. The consumer has the utility function = x=x1ax21-a.
(a) Find her indirect utility function.
(b) Confirm Roy's identity by:
i. Differentiating the indirect utility function with respect to the price of
good 1;
ii. Using the first-order conditions to obtain solutions for 1x1 and XX,
and therefore an expression for -A1-Ax1;
iii. Showing that (a) and (b) give the same result.
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