A consumer is faced with the followlling Utility Function, U(x_(1 ) x_2) = (x_1^ + x_2^ )
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A consumer is faced with the followlling Utility Function, U(x_(1 ) x_2) = (x_1^ρ + x_2^ρ ) 1/ρ, where 0<ρ<1. The consumer also faces the prices p_1 and p_2 and has income level m. Set up the Lagrangian 0ptimisation function for the consumer and Compute the optimal consumption bundle for the consumer. [5 MARKS]
The solution in (a) represents the Marshallian demand function for x_(1 ) and x_2. Using the solution in (a) compute the indirect utility function. [5 MARKS]
Derive the corresponding expenditure function for the consumer and the Hicksian demand function. [5 MARKS]
Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
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