ii) iii) iv) Draw the consumer's Indifference Curves for U(x) = 1. Shade the area for which U(x) ≤ 1. Clearly justify your answer. Derive the consumer's Walrasian Demands for goods 1 and 2. Are they monotonic to the arguments that they were supposed to? Show your work. Derive the consumer's indirect Utility Function. Is it monotonic to the arguments that it was supposed to? Show your work.
ii) iii) iv) Draw the consumer's Indifference Curves for U(x) = 1. Shade the area for which U(x) ≤ 1. Clearly justify your answer. Derive the consumer's Walrasian Demands for goods 1 and 2. Are they monotonic to the arguments that they were supposed to? Show your work. Derive the consumer's indirect Utility Function. Is it monotonic to the arguments that it was supposed to? Show your work.
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.5P
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Part 2 3 4
Transcribed Image Text:Question 1
i) Which properties a consumer's preferences have to satisfy. Please list them and
provide one example for each one of them.
Suppose that a consumer's preferences are described by the following utility function:
U(x) = max {x₁, x₂}
Draw the consumer's Indifference Curves for U(x) = 1. Shade the area for which
U (x) ≤ 1. Clearly justify your answer.
Derive the consumer's Walrasian Demands for goods 1 and 2. Are they monotonic
to the arguments that they were supposed to? Show your work.
Derive the consumer's indirect Utility Function. Is it monotonic to the arguments
that it was supposed to? Show your work.
ii)
iii)
iv)
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