Answer to Question #278412 in Microeconomics for Abdul

Question

How to drive indirect utility function and expenditure function, using X raised to the power of alpha and Y raised to the power of beta [X^alpha multiple by Y^beta] as our Utility function, and Px•X + py•Y= I as our budget constrain

Answer 1

A consumer's indirect utility function gives the consumer's maximal attainable utility when faced with a vector p of goods prices and an amount of income I. It reflects both the consumer's preferences and market conditions.

The indirect utility function ${\displaystyle v(p_{1},p_{2},w)}$ is found by replacing the quantities in the utility function with the demand functions.

The expenditure function is the inverse of the indirect utility function with respect to income I.