3.D.3B Suppose that u(x) is differentiable and strictly quasiconcave and that the Walrasiandemand function x(p, w) is differentiable. Show the following:(a) If u(x) is homogeneous of degree one, then the Walrasian demand function x(p, w) andthe indirect utility function v(p, w) are homogeneous of degree one [and hence can be writtenin the form x(p, w) = wx(p) and v(p, w) = w(p)] and the wealth expansion path (see Section2.E) is a straight line through the origin. What does this imply about the wealth elasticitiesof demand?

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Answered: 3.D.3B Suppose that u(x) is…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.8P

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