subject
Business, 08.03.2021 19:50 isalih7256

Consider an economy in which there are two goods, 1 and 2, whose prices are pi > 0 and p2 > 0, respectively. The two goods can only be consumed in non-negative amounts x1 and t2, respectively. A consumer has preferences over R2 which are represented by the utility function The consumer's income is I > 0. (a) Formulate the consumer's utility maximization problem, find the first- order conditions for utility maximization, and find the Marshallian (un compensated) demand functions ri(Pi, P2, I) and r2(P1,P2, I) for goods 1 and 2, respectively. (Note: Use the Lagrangian method. Assume that the budget constraint holds with equality and that the solution is in terior (i. e. x1 > 0 and r2 > 0), thus disregarding the non-negativity constraints on x1 and x2.) Check that the second order conditions are satisfied
(b) Now formulate the corresponding expenditure minimization problem and find the Hicksian (compensated) demand functions r(p, P2, U) and r£(Pi, p2, U) for the two goods, where U 0 is some arbitrary level of utility. (Note again: Use the Lagrangian method. Assume that the solu- tion is interior and that the other relevant constraint holds with equalitv. Do not check the second order conditions for this problem.)
(c) Compute the indirect utility function V(pi, P2, I) and the expenditure function E(P1,P2, U).

ansver
Answers: 3

Other questions on the subject: Business

image
Business, 21.06.2019 16:00, krissy452
b) a student tests 100 students to determine whether other students on her campus prefer soda brand a or soda brand b and finds no evidence that preference for brand a is not 0.5. later, a marketing company tests all students on campus and finds no difference. choose the correct answer below.
Answers: 1
image
Business, 22.06.2019 16:30, emmmssss21
Bernard made a gift of $500,000 to his brother in 2014. due to bernard’s prior taxable gifts he paid $200,000 of gift tax. when bernard died in 2019, the applicable gift tax credit had increased. at bernard’s death, what amount related to the $500,000 gift to his brother is included in his gross estate?
Answers: 3
image
Business, 22.06.2019 23:10, katrinanuez
Which investment has the liquidity and can be converted into cash easily?
Answers: 2
image
Business, 23.06.2019 03:20, Wolfgirl2032
Suppose that fixed costs for a firm in the automobile industry (start-up costs of factories, capital equipment, and so on) are $5 billion and that variable costs are equal to $17,000 per finished automobile. because more firms increase competition in the market, the market price falls as more firms enter an automobile market, or specifically, , where n represents the number of firms in a market. assume that the initial size of the u. s. and the european automobile markets are 300 million and 533 million people, respectively. a. calculate the equilibrium number of firms in the u. s. and european automobile markets without trade. b. what is the equilibrium price of automobiles in the united states and europe if the automobile industry is closed to foreign trade? c. now suppose that the united states decides on free trade in automobiles with europe. the trade agreement with the europeans adds 533 million consumers to the automobile market, in addition to the 300 million in the united states. how many automobile firms will there be in the united states and europe combined? what will be the new equilibrium price of automobiles? d. why are prices in the united states different in (c) and (b)? are consumers better off with free trade? in what ways?
Answers: 1
You know the right answer?
Consider an economy in which there are two goods, 1 and 2, whose prices are pi > 0 and p2 > 0,...

Questions in other subjects: