1. Suppose the utility function for goods q1 and q2 is given by U(q1, q2) =...

1. Suppose the utility function for goods q1 and q2 is given by U(q1, q2) = q1q2 + q2

(a) Calculate the uncompensated (Marshallian) demand functions for q1 and q2

(b) Describe how the uncompensated demand curves for q1 and q2 are shifted by changes in income (Y) or the price of the other good.

(c) Calculate the expenditure function for q1 and q2 such that minimum expenditure = E(p1, p2, U)

(d) Use the expenditure function calculated in part (c) to compute the compensated demand (Hicksian) functions for goods q1 and q2.

(e) Describe how the compensated demand curves for q1 and q2 are shifted by changes in income (Y) or by changes in the price of the other good.

Expert Solution

Rahul Sunny answered 1 year ago

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