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(a) Consider the expenditure function (x, y,) = x 0.5 y 0.7 U, where > 0. Determine whether this function is a valid expenditure function.
(a) Consider the expenditure function (x, y,) = x0.5y0.7U, where > 0. Determine whether this function is a valid expenditure function.
(b) Consider an individual who consumes only two goods, and . She cannot borrow money and does not save money. Her Marshallian demand functions are xm= 0.8 (m/Px) and m = 0.57, where x and y are the prices of goods and respectively and is her income. Determine whether this set of demand functions is valid.
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