Paige has the utility function U(x, y) = ln(x) + 4yDo not worry about corner solutions when answering the following questions, you can use theLagrangian multiplier method. Paige's budget constraint is px x +Pyy = I What are Paige's Hicksian demand functions?Py○ Shz (Pz, Py, U) = (U — mn() +¹) · 1-1 ; hy (Pa,Py,U)In1)4px4 4Ohx (Px, Py, U)1 1-○ ha (Pa, Py, U) = Py; hy (Pz, Py, U) = (U − ln (P) + ¹) · — — —444px-Px4Py9=Py4pxPxhy (Pa, Py, U) = (U-In (Par) + 1). 1 - 14py4Px○ hz (Pa, Py, U) = (U - In () +1).Py111).Py2PT22○ hz (P«,Py;U) = 1;_hy (Pa, Py, U) = (U − ln ( 1₂ ) + ¹) · — — —2px- ; hy (Pa, Py, U) =—4PE4Py

Hicksian demand functions are also known as compensated demand functions. Hicksian demand functions…

Py 1 4px Py 4px ○ $ha (Pa, Py, U) = (U - In ( 1 ) + 1). —; hy (Px ›Py,U) = Ohr (Px, Py, U) - Py 4px Py ;hy (Pa, Py, U) = (U-In (P) + ○h (P, Py, U)=;hy = Oh (Pa, Py, U)= ; hy (Pa, Py, U)= Py 2px (Pa, Py, U) 1 4 = 1 1). ¼ - 4 4 Px (U - In ( 12₂ ) + 1) · 1 - 1 4 4 Py U-In ( 2 ) + 1) · 1/2 - 1/ 2

Py 1 4px Py 4px ○ $ha (Pa, Py, U) = (U - In ( 1 ) + 1). —; hy (Px ›Py,U) = Ohr (Px, Py, U) - Py 4px Py ;hy (Pa, Py, U) = (U-In (P) + ○h (P, Py, U)=;hy = Oh (Pa, Py, U)= ; hy (Pa, Py, U)= Py 2px (Pa, Py, U) 1 4 = 1 1). ¼ - 4 4 Px (U - In ( 12₂ ) + 1) · 1 - 1 4 4 Py U-In ( 2 ) + 1) · 1/2 - 1/ 2

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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