Assume that the preferences of a consumer can be expressed by the utility function0.75utx), 4+ x(i) Show that based on this utility function, the demand functions are forthe benefits provided by81 px =4381 р;тand xP2Pder 1 p is the price per unit 1 x, 2 p is the price per unit 2 x and m are the income ofthe consumer.(ii) Explain what is meant by the cross-price elasticity of a good. Calculatethe cross-price elasticity of the goodigiven in question (i), and give an interpretation ofthe result.

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Assume that the preferences of a consumer can be expressed by the utility function utw,4 2 x* + x, (i) Show that based on this utility function, the demand functions are for the benefits provided by 81 p x = 81 p P m and x; : P2 der i p is the price per unit i x, 2 p is the price per unit 2 x and m are the income of the consumer. (ii) Explain what is meant by the cross-price elasticity of a good. Calculate the cross-price elasticity of the gook igiven in question (i), and give an interpretation of the result.

Assume that the preferences of a consumer can be expressed by the utility function utw,4 2 x* + x, (i) Show that based on this utility function, the demand functions are for the benefits provided by 81 p x = 81 p P m and x; : P2 der i p is the price per unit i x, 2 p is the price per unit 2 x and m are the income of the consumer. (ii) Explain what is meant by the cross-price elasticity of a good. Calculate the cross-price elasticity of the gook igiven in question (i), and give an interpretation of the result.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.11P

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