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Topic: Exercises 1.29 & 1.46
Conf: Chapter 1, Consumer Theory, Msg: 13000
From: Y Y (bpleo@hotmail.com)
Date: 4/17/2003 07:01 AM
Exercises 1.29 & 1.46 Y Y bpleo bpleo@hotmail.com
(a) e(p,1)=minP*X u(x)>=1
u*e(p,1)=u*minP*X u*u(x)>=u*1=u
u(x) is a linear homogeneous utility function
so u*u(x)=u(ux)>=u
u*e(p,1)=u*minP*X=minP*uX=e(P,u),u(ux)>=u
so e(P,u)=e(P,1)*u
(b) according to (a),e(P,u)=e(P,1)*u,
and e(P,u)=y,so y=e(P,1)*u,
then, du/dy=1/e(P,u)
so,the marginal utilty of income depends on P,but is independent of y.
Anyway,I am not so sure that the solutions are right.So, please check them and discuss with me and let's help each other:).