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The utility is given by the Cobb-Douglas function U(x, y) = xy, where + 8 = 1. The financial environment is a general one
The utility is given by the Cobb-Douglas function U(x, y) = xy, where + 8 = 1. The financial environment is a general one with prices Px, Py and income I. (a) Calculate the uncompensated demand functions for x and y. 1 (b) Now assume that = and & = 3 2 3 (Hint: remember the general form for xand y for the Cobb-Douglas case, from part (a)). Calculate the indirect utility function, the expenditure function and compensated demand function for x. (c) State the Slutsky equation in general. Use results from part (b) to present the Slutsky equation for this particular consumer problem.
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