Question: Consider the following indirect utility function (maximum value function), V (p, p2, m) m VP1 + P2 where p is the price of a

Consider the following indirect utility function (maximum value function), V (p, p2, m) m VP1 + P2 where p is the price of a goodx, P2 is the price of a good a2, and m is the income. (a) Find the demand function for at (p1, p2, m) and (p, p2, m). Now, assume (P, P2, m) = (1, 1, 12) for the following questions. (b) What is the optimal choice of and 2 at these prices and income? (c) Now, the price of good, has increased while p2 and m remain the same. Calculate the change of , i.e, axi ? ap1

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