Derive the first-order conditions for an expenditure minimum

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A consumer wants to minimize her expenditures, E= PxX + PyY, subject to maintaining a given level of utility, \bar{U} = xy.

A. form the Lagrangian for this problem, derive the first-order conditions for an expenditure minimum, and solve those conditions for her Hicksian demand functions, x* and y*, expressed in terms of the parameters in the problem.

B. Express the expenditure function solely in terms of the parameters in the problem, rather than x and y. Then show that your Hicksian demand functions in part A can be derived directly from the expenditure function by using Shephard's lemma.

Reference no: EM13898727

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