Consider the following indirect utility function: V(p, 1) = II ₁(ail Jai Pi where 1 ai = 1, and ai #0, Vi 1. What's the demand function for x? (Hint: Take logarithm to both sides of the equation) 2. What's the original utility function? (Hint: If n is too abstract, let n = 2)

Consider the following indirect utility function: V(p, 1) = II ₁(ail Jai Pi where 1 ai = 1, and ai #0, Vi 1. What's the demand function for x? (Hint: Take logarithm to both sides of the equation) 2. What's the original utility function? (Hint: If n is too abstract, let n = 2)

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Chapter1: Making Economics Decisions

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Concept explainers

Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.

Question

Consider the following indirect utility function:
V(p,I) = II,(
Pi
where E-1 a; = 1, and a; + 0 , Vi
1. What's the demand function for x;? (Hint: Take logarithm to both sides of the equation)
2. What's the original utility function? (Hint: If n is too abstract, let n =
= 2)

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