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Topic: how to solve for the ex 1.66,1.67
Conf: Chapter 1, Consumer Theory, Msg: 14105
From: Martin Caley (martin.caley@economics.treasury.gov.im)
Date: 2/17/2004 10:23 AM
how to solve for the ex 1.66,1.67 Martin Caley MCaley martin.caley@economics.treasury.gov.im
For 1.66, see the hint on page 524.
For part (a), minimimize p.x s.t u(x)<=u to get e(p,u)=p2.u - p2.p2/4.p1. Plug in y0=10 and p1=2,p2=2 to get u0=11/2.
For part (b), use part (a).
For part (c), mimic the proof on page 131 to show e(p,u)=k(u)e(p,1).
1.67 Since de(p,u)/dpi=xi(p,u),
dln e(p,u)/dln pi =de/dpi.pi/e
=xi.pi/e.