Question
Consider the question of when goods are normal in a 2 good Marshallian demand problem, and let the utility function be u(x1, x2)=u(x) for the
Consider the question of when goods are normal in a 2 good Marshallian demand problem, and let the utility function be u(x1, x2)=u(x) for the consumer. a. Consider sufficient conditions on the utility function for normal demand in this problem for both goods. That is, assume the price vector is fixed, and we increase the income of the consumer. Give sufficient conditions on the utility function so that the Marshallian demand problem for when good 1 is normal, but good 2 is not necessarily normal. b. Give a sufficient condition on the utility function u(x) such that good 2 is strictly decreasing in its "own" price (price of good 2)? c. Say utility is linear (for example, (u(x) = x1+x2). Explain why when P1=P2, one cannot say both goods are always "normal". d. In part (c ), actually argue one could say both goods can be normal or inferior.
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