As in Example 5.1, assume that utility is given by utility 5 U 1x, y2 5 x0.3 y0.7

.

a. Use the uncompensated demand functions given in Example 5.1 to compute the indirect utility function and the expenditure function for this case.

b. Use the expenditure function calculated in part (a)

together with Shephard’s lemma to compute the compensated demand function for good x.

c. Use the results from part

(b) together with the uncompensated demand function for good x to show that the Slutsky equation holds for this case.