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)

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
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...
Find the expenditure function, the Hicksian demand functions, and the Marshallian demand functions corresponding to the...
Find the expenditure function, the Hicksian demand functions, and the Marshallian demand functions corresponding to the indirect utility function V(p, r) = (a1/p1 + a2/p2)r. Note p is a vector of prices p1 and p2.
Derive walrasian demand, hicksian deman fuctions for the following utility functions. Also derive the indirect utility...
Derive walrasian demand, hicksian deman fuctions for the following utility functions. Also derive the indirect utility function and expenditure function. 1) U(X1,X2)= 2x1 2) U(X1,X2)= min{2x1,4x2) 3) U(X1,X2) =max{2x1,2x2] 4) U(X1,X2)=x12x22
Consider the utility function: u( x1 , x2 ) = 2√ x1 + 2√x2 a) Find...
Consider the utility function: u( x1 , x2 ) = 2√ x1 + 2√x2 a) Find the Marshallian demand function. Use ( p1 , p2 ) to denote the exogenous prices of x1 and x2 respectively. Use y to denote the consumer's disposable income. b) Find the indirect utility function and verify Roy's identity c) Find the expenditure function d) Find the Hicksian demand function
Set up the Lagrangean function and take the first order conditions for the following utility function:...
Set up the Lagrangean function and take the first order conditions for the following utility function: U (x1, x2 ) = x1a +x2a     The budget constraint is: p1 x1 + p2 x2 = y Then solve for your Marshallian demand functions: xi* (p1, p2, y) for i = 1,2. Verify that the second-order conditions hold for the consumption bundles solved for above. What conditions are required on the second derivatives of the utility function to ensure that the second order...
1.) Liz has utility given by u(x2,x1)=x1^7x2^8. If P1=$10, P2=$20, and I = $150, find Liz’s...
1.) Liz has utility given by u(x2,x1)=x1^7x2^8. If P1=$10, P2=$20, and I = $150, find Liz’s optimal consumption of good 1. (Hint: you can use the 5 step method or one of the demand functions derived in class to find the answer). 2.) Using the information from question 1, find Liz’s optimal consumption of good 2 3.) Lyndsay has utility given by u(x2,x1)=min{x1/3,x2/7}. If P1=$1, P2=$1, and I=$10, find Lyndsay’s optimal consumption of good 1. (Hint: this is Leontief utility)....
1. Using the following utility function, U(x1,x2) = x1x2+x1+2x2+2 Find the demand functions for both x1...
1. Using the following utility function, U(x1,x2) = x1x2+x1+2x2+2 Find the demand functions for both x1 and x2 (as functions of p1, p2, and m). Thank you!
Consider the Cobb-Douglas utility function u(x1,x2)=x1^(a)x2^(1-a). a. Find the Hicksian demand correspondence h(p, u) and the...
Consider the Cobb-Douglas utility function u(x1,x2)=x1^(a)x2^(1-a). a. Find the Hicksian demand correspondence h(p, u) and the expenditure function e(p,u) using the optimality conditions for the EMP. b. Derive the indirect utility function from the expenditure function using the relationship e(p,v(p,w)) =w. c. Derive the Walrasian demand correspondence from the Hicksian demand correspondence and the indirect utility function using the relationship x(p,w)=h(p,v(p,w)). d. vertify roy's identity. e. find the substitution matrix and the slutsky matrix, and vertify the slutsky equation. f....
We have noted that u(x) is invariant to positive monotonic transforms. One common transformation is the...
We have noted that u(x) is invariant to positive monotonic transforms. One common transformation is the logarithmic transform, ln(u(x)). Take the logarithmic transform of the utility function; p1 x1 + p2 x2 = y and assume an interior solution, so assume x1 > 0 and x2 > 0, then, using that as the utility function, derive the Marshallian demand functions, and verify that they are identical to those derived.
The utility function is given by u (x1,x2) = x1^0.5 + x2^0.5 1) Find the marginal...
The utility function is given by u (x1,x2) = x1^0.5 + x2^0.5 1) Find the marginal rate of substitution (MRSx1,x2 ) 2) Derive the demand functions x1(p1,p2,m) and x2(p1, p2,m) by using the method of Lagrange.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT