lecture7full

# lecture7full - Recap Expenditure minimization...

This preview shows pages 1–18. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Recap Expenditure minimization Hicksian (compensated) demands HD0 in prices decreasing in own price Expenditure functions Substitute Hicksian demands into expenditures HD1 in prices increasing in prices increasing in utility Shephard's lemma Expenditure functions and Indirect utility functions E (p1 , p2 , u) = V (p1 , p2 , I) = 1- p1 p2 u (1 - )1- (1 - )1- I 1- p1 p2 Indirect utility functions and Expenditure functions E (p1 , p2 , u) = V (p1 , p2 , I) = 1- p1 p2 u (1 - )1- (1 - )1- I 1- p1 p2 Income and substitution effects Income and substitution effects 2 How do we get points A, B, and C? Example: Cobb Douglas 1- u(x1 , x2 ) = x1 x2 p1 x1 + p2 x2 = I p1 x1 + p2 x2 = I Example: Cobb Douglas 2 Example: Cobb Douglas 3 Example: Perfect Compliments u(x1 , x2 ) = min{x1 , x2 } p1 x1 + p2 x2 = I p1 x1 + p2 x2 = I Example: Perfect Compliments 2 Ordinary and Hicksian demands x1 (p1 , p2 , E (p1 , p2 , u)) = h1 (p1 , p2 , u) The Slutsky equation x1 + p1 x1 E E h1 = p1 p1 x1 h1 = - p1 p1 x1 I E p1 The Slutsky equation 2 x1 + p2 x1 E E h1 = p2 p2 x1 h1 = - p2 p2 x1 I E p2 Inverse demand curves Inverse demand curves 2 Inverse demand curves 3 ...
View Full Document

## This note was uploaded on 05/13/2010 for the course ECON 105D taught by Professor Cur during the Fall '09 term at Duke.

### Page1 / 18

lecture7full - Recap Expenditure minimization...

This preview shows document pages 1 - 18. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online