In a 2 good (x) and x2) model, the consumer's utility is given by:

U= x' + x}

where U is utility, P is the price of good 1, P2 is the price of good 2 and mis income.

(a)

(b)

Find the hicksian (compensated) demand functions, -x,(U,P) for each good by minimising the expenditure required to attain a given level of utility. Assume the second order conditions hold. Do not check the second order conditions.

(7 marks)

Solve for the expenditure function. optimal M expressed in terms of U and prices