1. A consumer consumes two commodities, x and y. The consumer has utility function U (x,...

 

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1. A consumer consumes two commodities, x and y. The consumer has utility function U (x, y) = (x - A)² y and faces the budget constraint pxx + pyy = m. The shift parameter A is age. a) Find the Marshallian demands for both goods. b) How does the optimal consumption of both goods change with age? Explain. c) Find the indirect utility as a function of prices and income. d) Find the marginal utility of money as a function of prices and age e) What happens to U (x,y) as the individual ages? f) Provide an example for goods x and y that may be represented by this utility function. Explain your answer. 1. A consumer consumes two commodities, x and y. The consumer has utility function U (x, y) = (x - A)² y and faces the budget constraint pxx + pyy = m. The shift parameter A is age. a) Find the Marshallian demands for both goods. b) How does the optimal consumption of both goods change with age? Explain. c) Find the indirect utility as a function of prices and income. d) Find the marginal utility of money as a function of prices and age e) What happens to U (x,y) as the individual ages? f) Provide an example for goods x and y that may be represented by this utility function. Explain your answer.

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Find the Marshallian demands for both goods x 2 y 2Axy A 2 y m p x x p y y 3 focs x 2xy 2Ay A 2 Y p ... View the full answer