4. Consider the general multiplicatively separable utility function given by u (x1, x2) = µu1 (x1) u2 (x2),and budget constraint given by p1x1+P2X2 = W.(a) Find the wealth effect for good 1. Show that, for a "well-behaved" utility function of thisг —a2 uform (i.e.,ди> 0, i = 1,2; and < 0, i =1, 2), good 1 must be a normal good.Explain intuitively why this should be so.(b) Find the own price effect for good 1.(c) Show that good 1 being a normal good is a sufficient condition for good 1 not being aGiffen good.

Given Utility function U=μX1X2Budget consraint=P1X1+P2X2=WW= income of the consumerP1= price of good…

4. Consider the general multiplicatively separable utility function given by u (x1,x2) = pu1 (x1) u2 (x2), and budget constraint given by pič1 + P2X2 = w. (a) Find the wealth effect for good 1. Show that, for a "well-behaved" utility function of this form (i.e., > 0, i = 1,2; and * < 0, i = Explain intuitively why this should be so. 1, 2), good 1 must be a normal good. (b) Find the own price effect for good 1. (c) Show that good 1 being a normal good is a sufficient condition for good 1 not being a Giffen good.

4. Consider the general multiplicatively separable utility function given by u (x1,x2) = pu1 (x1) u2 (x2), and budget constraint given by pič1 + P2X2 = w. (a) Find the wealth effect for good 1. Show that, for a "well-behaved" utility function of this form (i.e., > 0, i = 1,2; and * < 0, i = Explain intuitively why this should be so. 1, 2), good 1 must be a normal good. (b) Find the own price effect for good 1. (c) Show that good 1 being a normal good is a sufficient condition for good 1 not being a Giffen good.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.9P

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