2. Think about a consumer with a utility function of U(x,y) =2xy+1, his budget constraint is px*x +py*y= m. а. Please derive the Marshallian demand functions. b. What would happen to the demand of each good if m increases(assume price is alwavs positive)? Are they normal good or inferior good? С. Please derive the indirect utility function. d. Please derive the expenditure function. If originally m = 20, px=1, py=5. е. What is his optimal consumption? f. What is his maximum utility level? Now if px has increased to 2. g. After the price change, how much should be compensated to maintain his original utility level? Use Shaphard's Lemma to derive the Hicksian demand functions. After the price change and the compensation, what is his optimal h. i. consumption? j. consumption? If there is no compensation, after the price change, what is his optimal

2. Think about a consumer with a utility function of U(x,y) =2xy+1, his budget constraint is pxx +pyy= m. а. Please derive the Marshallian demand functions. b. What would happen to the demand of each good if m increases(assume price is alwavs positive)? Are they normal good or inferior good? С. Please derive the indirect utility function. d. Please derive the expenditure function. If originally m = 20, px=1, py=5. е. What is his optimal consumption? f. What is his maximum utility level? Now if px has increased to 2. g. After the price change, how much should be compensated to maintain his original utility level? Use Shaphard's Lemma to derive the Hicksian demand functions. After the price change and the compensation, what is his optimal h. i. consumption? j. consumption? If there is no compensation, after the price change, what is his optimal

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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