Answer to Question #90455 in Microeconomics for goodleaderson

Question

A consumer's preference over a single good x and
other goods y is represented by a utility function
u(x, y)=log x + y.
If the price of x =P and that of y=1 and income
M > 1
(a) Derive the Marshallian demand for x and
y.
(b) Derive indirect utility function.
(c) Use Slutsky equation to decompose the effect
of own price change on the demand for x
into an income and substitution effect.

Answer 1

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