Answered: e(p, u) = up1αp2βp3γ Find the…

e(p, u) = up1αp2βp3γ Find the indirect utility function Find the Walrasian demand function Verify Roy's identity Recover consumer's direct utility function

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.8P

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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

e(p, u) = up₁^αp₂^βp₃^γ

Find the indirect utility function
Find the Walrasian demand function
Verify Roy's identity
Recover consumer's direct utility function

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Step 1: Define Demand function

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Step 2: Find indirect utility function

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Step 3: Find Walrasian demand function

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Step 4: Verify Roy's identity

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Step 5: Determine consumer's direct utility function

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