Hello, I'm having a hard time with my Micro Homework Suppose that the consumers utility function is defined by u(x1,x2,x3) 1 log(x1 1) 2 log(x2 2) 3 log(x3) and that the consumer is faced with consumer prices p1 and p2, where the price of the third good is normalized to unity, so the consumers endowment (m) is measured in units of good three, in fact Moreover, 1 2 3 1 a) Find the indirect utility function and expenditure function corresponding to this set of preferences b) Use your results from (a) to find an analytic expression for the compensat ing variation (CV) In the special case of 1 2 40 and 1 2 50, find the CV associated with a tax reform that changes (p1, p2, m) from (1, 1, 5), a setting with no taxes, to (2, 1 5, 5) Find the efficiency cost of the tax reform, defined as CV minus the compensated revenue associated with this reform Hint An interior optimum exists Any help would be appreciated, thank you )

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Question: Hello, I'm having a hard time with my Micro Homework: Suppose that the consumers utility function is defined by: u(x1,x2,x3)=1log(x1 1)+2log(x2 2)+3*log(x3) and that the

Hello, I'm having a hard time with my Micro Homework:

Suppose that the consumers utility function is defined by: u(x1,x2,x3)=1*log(x1 1)+2*log(x2 2)+3*log(x3)

and that the consumer is faced with consumer prices p1 and p2, where the price of the third good is normalized to unity, so the consumers endowment (m) is measured in units of good three, in fact. Moreover, 1 + 2 + 3 = 1.

a) Find the indirect utility function and expenditure function corresponding to this set of preferences.
b) Use your results from (a) to find an analytic expression for the compensat- ing variation (CV). In the special case of 1 = 2 = .40 and 1 = 2 = .50, find the CV associated with a tax reform that changes (p1, p2, m) from (1, 1, 5), a setting with no taxes, to (2, 1.5, 5). Find the efficiency cost of the tax reform, defined as CV minus the compensated revenue associated with this reform.

Hint: An interior optimum exists.

Any help would be appreciated, thank you :-)!

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Question: Hello, I'm having a hard time with my Micro Homework: Suppose that the consumers utility function is defined by: u(x1,x2,x3)=1*log(x1 1)+2*log(x2 2)+3*log(x3) and that the

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Question: Hello, I'm having a hard time with my Micro Homework: Suppose that the consumers utility function is defined by: u(x1,x2,x3)=1log(x1 1)+2log(x2 2)+3*log(x3) and that the