Question: Given U ( x,y ) = x 0.4 y 0.6 and I = p x x + p y y. Based on this information 1.

Given U(x,y) = x0.4y0.6and I = pxx + pyy. Based on this information

1.Estimate the bundle that maximizes the level of utility (Marshallian demand function)

2.Derive the indirect utility function

3.Derive the demand function from the indirect function (Hint: Roy's identity)

4.Derive the expenditure function

5.Derive the compensated demand function for each good

6.Estimate the substitution and income effect of own price change for each good

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