Question: Find the indirect utility function for the consumer with the following utility function U(x1, x2) = (x1 + 1)x2 2. Suppose a consumer's income elasticities

  1. Find the indirect utility function for the consumer with the following utility function

U(x1, x2) = (x1 + 1)x2

2. Suppose a consumer's income elasticities are constant and equal across all goods. (5)

(a) What is the income elasticity for each good? Prove this result.

(b) Suppose a consumer has a utility function which is a homothetic function. Show that

the income elasticities have to be equal.

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