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Compensated demand functions for goods

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Reference no: EM131090593

Question:

Suppose the utility function for goods x and y is given by: 

Utility = U(x, y) = xy + 0.4y

a) Calculate the uncompensated (Marshallian) demand functions for x and y and describe how the demand curves for x and y are shifted by changes in income or the price of the other good. Show all working.

b) Calculate the expenditure function for x and y.

c) Use the expenditure function calculated in part (b) to compute the compensated demand functions for goods x and y.

d) Describe how the compensated demand curves for x and y are shifted by changes in income or by changes in the price of the other good.

Reference no: EM131090593

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