Answer to Question #265869 in Finance for Happy

Question

An individual consumes goods ₁ and 2. Let w be the wealth of individual and p₁> 0 and p2 > 0 be the prices of the goods. For each of the following utility functions provide a real life example of two goods ₁ and 22 that satisfy them, draw the indifference curves, determine whether preferences are convex, strictly convex or neither, and compute the Walrasian demand, indirect utility function, Hicksian demand and expenditure function:

a. U(x1, x₂) min{2x1, x2} =

b. U(1,2)= max{2x1,2}

c. U(x1, x2) = 2x₁ + x₂

d. U(x1, x2) = x²x₂

Answer 1

x1, x₂) min{2x1, x2} =

b. U(1,2)= max{2x1,2}

c. U(x1, x2) = 2x₁ + x₂