Consider utility functions and . Let and be the prices of goods and , and wealth. For , let denote the set of solutions of: choose and to minimise subject to . Let , where . Then
Tap an option to check your answer.
Consider utility functions and . Let and be the prices of goods and , and wealth. For , let denote the set of solutions of: choose and to minimise subject to . Let , where . Then
Tap an option to check your answer.
Checking your account…
Consider utility functions u₁(x,y)={ 2x if y/x>2; max {x,y} if y/x∈[1/2,2]; 2y if y/x<1/2 } and u₂(x,y)={ 2x if y/x>2; x+y if y/x∈[1/2,2]; 2y if y/x<1/2 }. Let pₓ>0 and p_y>0 be the prices of goods x and y, and w>0 wealth. For i=1,2, let hᵢ(pₓ,p_y,U) denote the set of solutions of: choose x>0 and y>0 to minimise pₓx+p_yy subject to uᵢ(x,y)≥ U. Let eᵢ(pₓ,p_y,U)=pₓX+p_yY, where (X,Y)∈ hᵢ(pₓ,p_y,U). Then (A) None of the above hold necessarily. (B) h₁(pₓ,p_y,U)=h₂(pₓ,p_y,U) (C) h₁(pₓ,p_y,U)⊂ h₂(pₓ,p_y,U) (D) h₁(pₓ,p_y,U)⊃ h₂(pₓ,p_y,U)
Also written as: Consider utility functions u_1(x,y)={ 2x if y/x>2; max {x,y} if y/x in [1/2,2]; 2y if y/x<1/2 } and u_2(x,y)={ 2x if y/x>2; x+y if y/x in [1/2,2]; 2y if y/x<1/2 }. Let p_x>0 and p_y>0 be the prices of goods x and y, and w>0 wealth. For i=1,2, let h_i(p_x,p_y,U) denote the set of solutions of: choose x>0 and y>0 to minimise p_xx+p_yy subject to u_i(x,y)>= U. Let e_i(p_x,p_y,U)=p_xX+p_yY, where (X,Y) in h_i(p_x,p_y,U). Then
Demand theory and elasticity has come up 161 times in 7 exams since 2004.
This question is on Hicksian demand, the expenditure function and duality, part of Demand theory and elasticity in Microeconomics.
Compensated demand, the expenditure and indirect utility functions, and the links between them.
TestStop has 9 past-paper questions on this subtopic.
Question from the DSE 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.