Assume that utility is given by and Income I, price of good x = P = U(2,y) = 03J0.7 and price of good y = Py Show your work for each of the following parts (a) Use the uncompensated demand functions to compute the indirect utility function and the expenditure function (E) for this case. (b) Use the expenditure function calculated in part (a) together with Shephard's lemma to compute the compensated demand function for good x. (c) Use the results from part (b) together with the uncompensated demand function for good x to show that the Slutsky equation holds for this case.

Assume that utility is given by and Income I, price of good x = P = U(2,y) = 03J0.7 and price of good y = Py Show your work for each of the following parts (a) Use the uncompensated demand functions to compute the indirect utility function and the expenditure function (E) for this case. (b) Use the expenditure function calculated in part (a) together with Shephard's lemma to compute the compensated demand function for good x. (c) Use the results from part (b) together with the uncompensated demand function for good x to show that the Slutsky equation holds for this case.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.

Question

6. Assume that utility is given by
U(x,y) = x03J07
and Income I, price of good x = P and price of good y = Py
1
Show your work for each of the following parts
(a) Use the uncompensated demand functions to compute the indirect utility function and the
expenditure function (E) for this case.
(b) Use the expenditure function calculated in part (a) together with Shephard's lemma to
compute the compensated demand function for good x.
(c) Use the results from part (b) together with the uncompensated demand function for good
x to show that the Slutsky equation holds for this case.

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