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?

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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