Answer to Question #305254 in Microeconomics for G6ix

Question

The utility function of a household is given by U^0 = A^0.4B^0.7 . Suppose the prices of

commodities A and B are denoted as pa and Pb respectively.

a. Derive the relevant household Hickson's demand functions given that household income is denoted as Y.

b. Would you say that the two commodities A and B are substitutes? Why?

c. Derive the equation of income consumption curve.

d. Derive the marginal rate of commodity substitution.

Answer 1

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