! For the following utility function, u(x, y)=Vxy,(a) Verify that Shephard's Lemma:[ƏE(px,py,U)/ðpx=x px.py,U)](b) Find the income effect for good x.(c) Show that the indirect utility function ishomogeneous of degree zero.

We are going to use marginal rate of substitution to find marshallian demand for both goods. Income…

For the following utility function, u(x, y) =Vxy, (a) Verify that Shephard's Lemma: [ƏE(px,py,U)/dpx=x (px.py,U)] (b) Find the income effect for good x. (c) Show that the indirect utility function is homogeneous of degree zero.

For the following utility function, u(x, y) =Vxy, (a) Verify that Shephard's Lemma: [ƏE(px,py,U)/dpx=x (px.py,U)] (b) Find the income effect for good x. (c) Show that the indirect utility function is homogeneous of degree zero.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.8P

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Question

For the following utility function, u(x, y)
=Vxy,
(a) Verify that Shephard's Lemma:
[ƏE(px,py,U)/ðpx=x px.py,U)]
(b) Find the income effect for good x.
(c) Show that the indirect utility function is
homogeneous of degree zero.

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