Question

Suppose the indirect utility functions is: v(p1, p2, m) = ln (m /p2) , if p1...

Suppose the indirect utility functions is: v(p1, p2, m) = ln (m /p2) , if p1 ≥ m.( m−p1)/ p1 + ln (p1/ p2) , if p1 < m.

a) Compute the Marshallian demand for both goods x1 and x2 for the different values of m.

b) Based on your answers from (a), can you guess the type of the original utility function u(x) (Hint: It is one of the 5 common utility functions we have taken in the course)? Explain your answer?

c) Compute the expenditure functions e(p1, p2, u) [Note: The conditions: if p1 ≥ m and p1 < m will also change to another form].

d) Compute the Hicksian demand functions h1(p1, p2, u) and h2(p1, p2, u)

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