Instructions-Attempt all Questions Question One Consider an individual with the utility function, U(x₁, x₂) = (a₁x₁² + a₂x²³)¯½³. The prices and x₂ and his income are PX₁ >0, Px₂ > 0, and I > 0. i. Show that this utility function satisfies diminishing marginal rate of substitution. and X₂ ii. Derive his Marshallian (uncompensated) demand functions for X₁ iii. Derive his indirect utility function. iv. Determine the Roy's identity
Instructions-Attempt all Questions Question One Consider an individual with the utility function, U(x₁, x₂) = (a₁x₁² + a₂x²³)¯½³. The prices and x₂ and his income are PX₁ >0, Px₂ > 0, and I > 0. i. Show that this utility function satisfies diminishing marginal rate of substitution. and X₂ ii. Derive his Marshallian (uncompensated) demand functions for X₁ iii. Derive his indirect utility function. iv. Determine the Roy's identity
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.7P
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