Question

just need parts e,f,g

2. Jane's utility function defined over two goods x and y is U (x,y) = x/2y12. Her income is M and the prices of the two goods are p, and p. (a) Find the Marshallian demand curves. (b) Find the Hicksian demand curves. (c) Find the indirect utility function. (d) Find the expenditure function. (e) Determine the substitution and income effects for good r when ini- tially M =$12, P. = $2.P, = $1, and then the price of good r rises to $3. (1) Show the effects from the previous part graphically. (g) How many dollars is Jane willing to accept as a compensation for this price increase?

Answer 1

a Expenditure f elpu) = M = 20 Jpx py e Hickran demand fn a Uca,y) = say BC - Px. X + Py. Y = M. 0 - 3 1 7 ug = 1 Kg u P Py. UX = Px. Uy YVE - BJ ly. Y = Px 9423 y Px.x + Pg. xPx am 203 2 M=$12, P x = $2 original demand vector Py = $1 pe = $3. Now money income $3 X (3) $1(6)=$9 +$6 =$15 = M² Intermediary consumption 6) c) Indirect Utility Fn > Vem, p)= xy - Jax vem,p) = ( m / Perry (2px 3-2.5 2py) 2(3) 2(1) = 0.5 less } substitution X 7 7 vem, p) y 7.5-6 = 105. More je

the pre Quantity of y th 12 insisoins moon I=p x+Pyy ** I= Pxx+Pyy * 20$* *** Quantity of Substitution Income effect effect Total increase Da bi inx

G) $3 as compensation.