Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Need help answering question 2 I have the answer from question 1. Thanks! B. [This problem is based on Homework 2, specifically 4.1 and 4.2

Need help answering question 2 I have the answer from question 1. Thanks!

image text in transcribed
B. [This problem is based on Homework 2, specifically 4.1 and 4.2 from the textbook.] A consumer has wealth w, faces prices p, and p2 for the two goods that give her/him joy, x1 and X2. Their utility is given by u(21, (2) = 1 log(x1) + log(22). 1. Using the Lagrangean method, find the consumer's Marshallian demand functions and their indirect utility function. Pix, + P 2 2 2 = w 2 = 4 log call) + 3, log(xz) + 2 (w -pix, -P2x(2) FOCS : - 2 PI = 0 doz = 4212- 2 Pz =0 de 27 = w - pix , - P 2 02 = 0 = > => My = 212 P2 3 E 2 P2 3 P = > Pi( 22P2) * 3 P , ) + Pzaz = W = > 72 = 4P, 3w = 7 21 = ( 4P2 ) 12 = 4P, 3 w w w 2, = 4P, 2127= 4P2 3 P1 U ( P , , P 2 , W ) = 7 log ( 4p, ) + # log ( =4P2 ) 2. Check directly that the multiplier you found gives the con- sumer's marginal utility of wealth

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Price theory and applications

Authors: Steven E landsburg

8th edition

538746459, 1133008321, 780538746458, 9781133008323, 978-0538746458

More Books

Students also viewed these Economics questions