Question

2. For Each of the following situations,

i) Write the Indirect Utility Function

ii) Write the Expenditure Function

iii) Calculate the Compensating Variation

iv) Calculate the Equivalent Variation

a) U(X,Y) = X^1/2 x Y^1/2. M = $288. Initially, PX= 16 and PY

= 1. Then the Price of X changes to PX= 9.

i) Indirect Utility Function: __________________________

ii) Expenditure Function: ____________________________

iii) CV = ________________

iv) EV = ________________

b) U(X,Y) = MIN (X, 3Y). M = $40. Initially, P

X= 1 and PY= 1. Then the Price of X changes to PX= 3.

i) Indirect Utility Function: __________________________

ii) Expenditure Function: ____________________________

iii) CV = ________________

3. Suppose A consumer's utility function is given by U(X,Y) = 3X + Y. The consumer has

$120 to spend (M = $120). Sketch the graph of the consumer's demand function for Good X. Please put

the Price of X, PX, on the vertical axis, and the quantity of Good X, X, on the horizontal axis. Scale the

Price axis up to $12, and scale the quantity axis up to 120

iv) EV = ________________

Answer 1

Its Mandatory To solve only first Ques necessarily