Question: I am confused about this problem: Ann's utility function is uA(q,m) = + m and income Y. The price of good q is pg and

I am confused about this problem:

I am confused about this problem: Ann's utility function is uA(q,m) =

Ann's utility function is uA(q,m) = + m and income Y. The price of good q is pg and the price of good m is pm. (a) Find the solution to Ann's optimisation problem using Lagrange method, assuming that solution is in the interior (that is, not a corner solution; or, to put it differently, ignoring problems that you would be asked to address in part (b)). (b) What conditions should be imposed on parameters (pg, pm, Y) to ensure that the solution you have found in (a) is valid? (c) Suppose that conditions you have found in (b) are not satised. What is the solution to Ann's optimisation problem in that case? (d) Write Ann's Marshallian demand for goods 1 and 2. (That is, you need to write Ann's Optimal consumption bundle for any price 10!: > 0, pm > O, and any income Y, by combining your solutions in (a) and (c)) (e) Using Slutsky decomposition, nd the derivatives of Ann's Hicksian demand for good q (with respect to both pg and pm). (f) Given (e), conjecture the formula for Ann's Hicksian demand for good

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