Unformatted text preview: c. How much will expenditure increase if the price of gin doubles? d. What happens to expenditures if both the price of gin and vermouth double? 3. For the general Cobb-Douglas utility function, 1 ( , ) , 0 1 a a U x y x y a-= ≤ ≤ and using , , and for prices and income x y p p I a. Derive the indirect utility function and give its meaning. b. Derive the expenditure function for arbitrary utility level U and give its meaning. b. Give the best intuitive or graphical explanation that you can for why the expenditure function is concave in prices....
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- Winter '08
- Economics, Consumer price index, expenditure function