Section I: Derivation of Hicksian Demand Curve Joyce’s utility function is as follows: U= 10X3Y2 Where,...

Section I: Derivation of Hicksian Demand Curve

Joyce’s utility function is as follows:

U= 10X³Y²

Where, X, is the quantity of good X consumed, Y, is the quantity of good Y consumed and, U, is Joyce’s utility function.

The general budget constraint for the two goods is a follow:

B= P_XX + P_YY

Derive Joyce’s Marshallian demand equation for good X. Also compute her demand for good X when B= 500, and the price of good X is 1 and 2. Also draw the Marshallian demand curve for X at these prices.

What is Joyce’s optimal amount of good Y purchased if P_Y= 1 and P_x=1 and if P_x=2 and P_Y= 1?

Derive the Hicksian demand for good X at these prices. Hint, you need to choose the three correct equations you’ve derived above and solve simultaneously. Also, draw both demand curves on the same graph.

Using the information derived in parts A and B, what is the substitution effect and income effect obtained when changing the price of good x from a value of 1 to a value of 2.

Expert Solution

Rahul Sunny answered 1 hour ago

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