Kindly answer this question as soon as possible please. Let a consumer's preferences are reflected by a Cobb-Douglas utility function ie.,UCXX) = Xf X%3Da MBMX2 =P2The demand functions derived from this utility function are:P1Where, M is the income level, P1 and P2 are respective prices. a and B are respective shares ofX1 and X2, and a+B=1Calculate and prove the following:• For good X1, sum of all price and income elasticities is equal to zero.• Weighted sum of all income elasticities is equal to one.Weighted sum of all price elasticities with respective to the price of one good isnegative.

X1= αMP1 Question1: Price elasticity of good X1: = dX1dP1*P1X1 =-αMP12 * P1X1= -αMP1(αMP1) = -1…

Let a consumer's preferences are reflected by a Cobb-Douglas utility function i.e., UXLX) = Xf x5 BM X2 P2 αM The demand functions derived from this utility function are: P1 Where, M is the income level, Pi and P2 are respective prices. g and B are respective shares of X1 and X2, and at+B=1 Calculate and prove the following: For good Xı, sum of all price and income elasticities is equal to zero. Weighted sum of all income elasticities is equal to one. Weighted sum of all price elasticities with respective to the price of one good is negative.

Let a consumer's preferences are reflected by a Cobb-Douglas utility function i.e., UXLX) = Xf x5 BM X2 P2 αM The demand functions derived from this utility function are: P1 Where, M is the income level, Pi and P2 are respective prices. g and B are respective shares of X1 and X2, and at+B=1 Calculate and prove the following: For good Xı, sum of all price and income elasticities is equal to zero. Weighted sum of all income elasticities is equal to one. Weighted sum of all price elasticities with respective to the price of one good is negative.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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