Question
Suppose that u(x) is differentiable and strictly quasiconcave and that the Walrasian demand function x(p, w) is differentiable. Show the following: If u(x) is
Suppose that u(x) is differentiable and strictly quasiconcave and that the Walrasian demand function x(p, w) is differentiable. Show the following: If u(x) is homogeneous of degree one, then the Walrasian demand function x(p, w) and the indirect utility function (p, w) are homogeneous of degree one [and hence can be written in the form x(p, w) = wx(p) and v(p, w) = w(p)] and the wealth expansion path is a straight line through the origin. What does this imply about the wealth elasticities of demand?
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Financial Accounting in an Economic Context
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