Question
Consider the utility function u (x, y ) = x + ln y with budget constraint p x x + p y y = I
Consider the utility function u(x,y) = x+ lny
with budget constraint pxx + pyy = I.
Remark: You must consider the possibility of corner solutions in answering the following questions
Find the consumer's Marshallian demand functions for xand y.
- Find the own-price elasticities, income elasticities, and cross-price elasticities for both xand y. Is it possible for xto be an inferior good? What about y?
- Find the consumer's indirect utility function.
Step by Step Solution
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Answer To solve this problem we will use the utility function uxy x lny and the budget constraint px...
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Microeconomics
Authors: David Besanko, Ronald Braeutigam
5th edition
1118572270, 978-1118799062, 1118799062, 978-1118572276
