Answer to Question #103815 in Microeconomics for adv micro 1.51

Question

1.51 Consider the utility function, u(x1, x2) = (x1)1/2 + (x2)1/2.
(a) Compute the demand functions, xi(p1, p2, y), i = 1, 2.
(b) Compute the substitution term in the Slutsky equation for the effects on x1 of changes in p2.
(c) Classify x1 and x2 as (gross) complements or substitutes

Answer 1

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