This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: You know what the demand function for X1 looks like. X1 = a/(a+b)*I/Px If you differentiate the above function w.r.t. own price, the other good ’ s price and income respectively and multiply appropriate term according to the definition of eacy elasticity, you will get the following. (Sorry, it is very hard to write differentiation equations by MS word) Own price elasticity : 1 Cross price elasticity : 0 Income elasticity : 1 5. This is Quasi-linear utility function. By MRS = ERS condition, we can derive a demand function for X. That is X = P y 2 / (4P x 2 ) There is no income effect in X, because there is no term such as income in the above equation. Therefore, Hicksian and Marshallian demand curve will be same. b CS = EV = CV...
View Full Document
This homework help was uploaded on 02/19/2009 for the course ECON 3010 taught by Professor Wissink during the Fall '07 term at Cornell.
- Fall '07