1 A consumer has utiiitv function U 31,592 = 3:132. 2 {a} Derive the indirect utility function and the Marshallian demand function. (h) Derive the
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what is the answer for (c) and (d)?  1 A consumer has utiiitv function U 31,592 = 3:132.
2
{a} Derive the indirect utility function and the Marshallian demand function.
(h) Derive the expenditure function and the I-[icksian demand function. {c} Suppose that his budget is I = soc and current prices are p? = 2 and p3 = 3. The
government is introducing a tax on \$1 of 1DD% so the price will increase to pi = 4. Compute
the compensating variation (CV) and equivalent variation [EV] associated to this price
increase. {d} 1ii&quot;.i'l1at is the change in consumer surplus {ﬁﬂS} associated to the price increase”?
Compare \$03 to UV and Er“. {e} Suppose that after the government introduces the tax, it also provides an income
suhnsidg,r equal to |ﬂCS| so that the consumer now has an income of I + |ﬁDS|. Compare
the welfare of the consumer before and after the tax and subsidy are implemented. Is the
consumer better off after the tax and subsidyr are implemented?

View the full answer ner's 8- .
U = D. 2 2
2
J B . C X , . P , t X , P Q = m
a ) marshallian demand functions are derived by using
the formula: [ = at a - a - I'm
( OfTP ) . P2
Part
There fore, =
m
a . = 2m
(a)
3 . Pg...

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