exercise 3

Exercise 3. This question explores what you have learned about the Hicksian demand function Part 1 - Quasilinear utility a) Show that if the utility function u(qx,qY) is quasilinear with respect to good Y, then the Hicksian demand function for good X does not depend on uo, Part 2 - Perfect complements - Leontief preferences When the consumer considers X and Y perfect complements, his utility function is u(qx,qY) = min[qx, qy] and it is not differentiable. a) Using a graphical approach find the Hicksian compensated demand curve for X and for Y in this case. b) Do the Hicksian demand functions depend on Px and/or Py? In this case, does a change in price create a substitution effect