1 Marshallian and Hicksian demand An agent consumes bundles of two goods, and has utility function U (3:) = + m over bundles. 1. Prices are initially p1 = 122 = 1, and the agent has wealth w = 8. (a) Calculate the agent's Marshallian demands. (b) How much utility does the agent achieve from the demanded bundle? 2. Now suppose a 100% sales tax is levied on good 1. (a) Calculate the agent's new Marshallian demand. (b) Calculate the agent's compensated demand at the utility level you calculated in part 1(b). How much additional wealth does the agent need to be given to afford this compensated demand bundle? (c) Does demand for good 1 drop more With the price change under the Marshallian or compensated demand? What effect explains this difference