Illustrate what is the laspeyres price index

Reference no: EM1347835

1- Suppose X & Y are 1-2 perfect substitutes, i.e. the consumer's satisfaction from every unit of X is twice of a unit of Y. Suppose in 2009 , PX = 3, PY = 2 and the consumer income is $12. In 2010, PX = 2.5, PY = 1.

a) Write down the utility function.

b) What is the ideal price index?

c) Illustrate what is the Laspeyres price index?

d) Calculate ideal and Laspeyres indices if U(X, Y) = Min (2X, Y)

Reference no: EM1347835

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