8. In a 2-good model, where the goods are denoted x, and x2, the consumer's utility 1 1 function is as follows: U = x3x Money income available is denoted m. All of this income is spent on the two goods. The prices of the two goods are p1 and p2 respectively. (a) By minimising expenditure, subject to the utility function, find the compensated (Hicksian) demand functions; that is, demand for each good expressed in terms of U P1 and p2. Do not check the second order conditions. (b) Substitute these conditional demand functions back into the objective function to find the expenditure function; that is, m in terms of U, P1 and P2. (c) Show that the derivative of the expenditure function with respect to P1 is the
8. In a 2-good model, where the goods are denoted x, and x2, the consumer's utility 1 1 function is as follows: U = x3x Money income available is denoted m. All of this income is spent on the two goods. The prices of the two goods are p1 and p2 respectively. (a) By minimising expenditure, subject to the utility function, find the compensated (Hicksian) demand functions; that is, demand for each good expressed in terms of U P1 and p2. Do not check the second order conditions. (b) Substitute these conditional demand functions back into the objective function to find the expenditure function; that is, m in terms of U, P1 and P2. (c) Show that the derivative of the expenditure function with respect to P1 is the
Chapter5: Income And Substitution Effects
Section: Chapter Questions
Problem 5.4P
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Can you please help awnser 8 C I have attached awnser to 8 a to make it easier to understand and complete.
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