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1. An agent consumes quantities (x, x2) of goods 1 and 2. The expenditure function is: C(u, P1, P2) = 30u pipa where 0
1. An agent consumes quantities (x, x2) of goods 1 and 2. The expenditure function is: C(u, P1, P2) = 30u pipa where 0 < a < 1. (a) Identify the agent's Hicksian/compensated/pure demands by Shephard's lemma. (15 marks) (15 marks) (15 marks) (20 marks) (15 marks) (20 marks) (b) Explain the substitution effect of good 1. (c) Derive the indirect utility function. (d) Identify the Marshallian demand functions. (e) Derive the price-elasticities of demand. (f) Derive the Slutsky decomposition equations.
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a To identify the agents Hicksiancompensatedpure demands using Shephards lemma we differentiate the expenditure function with respect to the prices P1 ...
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Microeconomics An Intuitive Approach with Calculus
Authors: Thomas Nechyba
1st edition
538453257, 978-0538453257
