Suppose that a consumer's utility function is U(x, x) xix-a a. Write down the consumer's ordinary...

 

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Suppose that a consumer's utility function is U(x₁, x₂) xix-a a. Write down the consumer's ordinary demands and indirect utility function (You can write down the steps, but we did this in class, so it's unnecessary) b. Find the expenditure function, using the indirect utility function. c. Use the expenditure function and Shepherd's Lemma to compute the compensated demands. d. Show that the partial derivative of the compensated demand for x₁ with respect to the price of x2 is equal to the partial derivative of the compensated demand for x2 with respect to the price of x₁. In other words, dx axh дрz др1 e. Use your result to show that the Slutsky equation holds for this case. = Suppose that a consumer's utility function is U(x₁, x₂) xix-a a. Write down the consumer's ordinary demands and indirect utility function (You can write down the steps, but we did this in class, so it's unnecessary) b. Find the expenditure function, using the indirect utility function. c. Use the expenditure function and Shepherd's Lemma to compute the compensated demands. d. Show that the partial derivative of the compensated demand for x₁ with respect to the price of x2 is equal to the partial derivative of the compensated demand for x2 with respect to the price of x₁. In other words, dx axh дрz др1 e. Use your result to show that the Slutsky equation holds for this case. =

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a The consumer s ordinary demands are x 1 p 1 p 2 I and x 2 p 1 p 2 I The in... View the full answer