EconomicsSuppose that an individual receives utility fromtwo goods X and Y and his utility function is givenby:u = -1/X –1/Y.a) Derive the Marshallian and Hicksian demandfunctions for X and Y.b) How would you determine whether X and Y aregross substitutes or gross complements?c) How would you determine whether X and Y arenet substitutes or net complements?

Let the budget constraint be; Pxx+Pyy=MU=-1x-1yMRS=1x21y2=y2x2At equilibrium;MRS=PxPyy2x2=PxPy

Suppose that an individual receives utility from two goods X and Y and his utility function is given by: u = -1/X -1/Y. a) Derive the Marshallian and Hicksian demand functions for X and Y. %3D b) How would you determine whether X and Y are gross substitutes or gross complements? c) How would you determine whether X and Y are net substitutes or net complements?

Suppose that an individual receives utility from two goods X and Y and his utility function is given by: u = -1/X -1/Y. a) Derive the Marshallian and Hicksian demand functions for X and Y. %3D b) How would you determine whether X and Y are gross substitutes or gross complements? c) How would you determine whether X and Y are net substitutes or net complements?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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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

Economics
Suppose that an individual receives utility from
two goods X and Y and his utility function is given
by:
u = -1/X –1/Y.
a) Derive the Marshallian and Hicksian demand
functions for X and Y.
b) How would you determine whether X and Y are
gross substitutes or gross complements?
c) How would you determine whether X and Y are
net substitutes or net complements?

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