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In Q1, you solved the maximization problem for U (x, y) - = xay-a subject to pxx + Pyy = m. 1. Using the
In Q1, you solved the maximization problem for U (x, y) - = xay-a subject to pxx + Pyy = m. 1. Using the Marshallian demand functions obtained back then, show that x* (Px, Py, m) and y* (Px, Py, m) are homogeneous of degree 0 in prices and income. [3 points] 2. Show that the indirect utility function, v(px, Py, m), is also homogeneous of degree 0 in prices and income. [3 points] 3. Use Roy's identity and show that you can indeed recover the original Marshallian demand functions. [4 points]
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To solve the maximization problem for the utility function Ux y xyla subject to the budget constraint Px Pyy m we can use the Lagrangian method Lets d...Get Instant Access to Expert-Tailored Solutions
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