A consumer's utility function is -a u = x1x², where ₁ and 2 are the quantities consumed of goods one and two, respectively, and a is a parameter. Let p₁ and p2 denote the prices of goods one and two, respectively, so that the total expenditure in goods one and two is p₁1 + P2x2. The minimum expenditure that can be achieved subject to the constraint that the consumer achieves the level of utility ū is given by e = P₁P₂ 1-ªμа (this expression can be obtained by solving the corresponding constrained optimization problem). Calculate an approximation to the change in e due to increasing the level of utility by a small quantity d.

A consumer's utility function is -a u = x1x², where ₁ and 2 are the quantities consumed of goods one and two, respectively, and a is a parameter. Let p₁ and p2 denote the prices of goods one and two, respectively, so that the total expenditure in goods one and two is p₁1 + P2x2. The minimum expenditure that can be achieved subject to the constraint that the consumer achieves the level of utility ū is given by e = P₁P₂ 1-ªμа (this expression can be obtained by solving the corresponding constrained optimization problem). Calculate an approximation to the change in e due to increasing the level of utility by a small quantity d.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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