Problem 2 We consider a n consumers and two goods Each consumer i has the following utility function, ui(x1,x2)=iln(x1+i)+ln(x21) Denote by wi the income of consumer i. 1. Assume consumer i demands positive amounts of both goods. Derive the Marshallian demand for each good, xi1(p1,p2,wi) and xi2(p1,p2,wi). 2. Let x1 denote the aggregate demand for good 1,ixi1(p1,p2,wi). Let i and j be two consumers such that i>j. How does the aggregate demand for good 1 vary if there is income redistribution from i to j ? 3. What conditions on i and/or i should we have so that the aggregate demand x1 does not depend on income distribution? Problem 2 We consider a n consumers and two goods Each consumer i has the following utility function, ui(x1,x2)=iln(x1+i)+ln(x21) Denote by wi the income of consumer i. 1. Assume consumer i demands positive amounts of both goods. Derive the Marshallian demand for each good, xi1(p1,p2,wi) and xi2(p1,p2,wi). 2. Let x1 denote the aggregate demand for good 1,ixi1(p1,p2,wi). Let i and j be two consumers such that i>j. How does the aggregate demand for good 1 vary if there is income redistribution from i to j ? 3. What conditions on i and/or i should we have so that the aggregate demand x1 does not depend on income distribution