Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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. Consider the following utility function over goods 1 and 2,
u (x1,x2)=√√√In A + alnæı + (1 − a) Inx2
where A 0 and a € (0, 1).
(a) [15 points] Derive the Marshallian demand functions and the indirect utility
function.
(b) [15 points] Show two different ways to derive the Hicksian demand function for
good 2.
(c) [10 points] Using the functions you have derived in the above, show that the
Hicksian demand function for goods 2 is homogeneous of degree zero in prices.
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Transcribed Image Text:. Consider the following utility function over goods 1 and 2, u (x1,x2)=√√√In A + alnæı + (1 − a) Inx2 where A 0 and a € (0, 1). (a) [15 points] Derive the Marshallian demand functions and the indirect utility function. (b) [15 points] Show two different ways to derive the Hicksian demand function for good 2. (c) [10 points] Using the functions you have derived in the above, show that the Hicksian demand function for goods 2 is homogeneous of degree zero in prices.
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Microeconomic Theory
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ISBN:9781337517942
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