hicksian - 1 Hicksian Demand Functions, Expenditure...

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1 Edward R. Morey Feb 20, 2002 Hicksian Demand Functions, Consider a world with 2 goods ( x and y ), where Wilbur has well-defined preferences over bundles of those two goods, and those preferences can be represented by the utility function . Wilbur has income m and faces the parametric prices p x and p y . So Wilbur chooses the bundle that max s.t. . Consider Wilbur’s Hicksian (conditional) demand functions for x and y . where x h is the amount of x Wilbur would purchase to achieve utility level u given the prices p x and p y . The problem is min wrt to x and y s.t. The solution is that x and y that min the cost of producing u utility given preference and the prices p x and p y
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2 Edward R. Morey Feb 20, 2002 So, Hicksian demand functions are the solution to a cost minimum problem. What would one get if one plugged
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hicksian - 1 Hicksian Demand Functions, Expenditure...

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