1. An agent consumes quantities (x, x2) of goods 1 and 2. The expenditure function is:...
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1. An agent consumes quantities (x, x2) of goods 1 and 2. The expenditure function is: C(u, P1, P2) = 30u pipa where 0 < a < 1. (a) Identify the agent's Hicksian/compensated/pure demands by Shephard's lemma. (15 marks) (15 marks) (15 marks) (20 marks) (15 marks) (20 marks) (b) Explain the substitution effect of good 1. (c) Derive the indirect utility function. (d) Identify the Marshallian demand functions. (e) Derive the price-elasticities of demand. (f) Derive the Slutsky decomposition equations. 1. An agent consumes quantities (x, x2) of goods 1 and 2. The expenditure function is: C(u, P1, P2) = 30u pipa where 0 < a < 1. (a) Identify the agent's Hicksian/compensated/pure demands by Shephard's lemma. (15 marks) (15 marks) (15 marks) (20 marks) (15 marks) (20 marks) (b) Explain the substitution effect of good 1. (c) Derive the indirect utility function. (d) Identify the Marshallian demand functions. (e) Derive the price-elasticities of demand. (f) Derive the Slutsky decomposition equations.
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a To identify the agents Hicksiancompensatedpure demands using Shephards lemma we differentiate the expenditure function with respect to the prices P1 ... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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