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Consider a simple quasi-linear utility function of the form U(x, y)=x lny a. Calculate the income effect for each good. Also calculate the income elasticity of demand for each good. b. Calculate the substitution effect for each good. Also calculate the compensated own-price elasticity of demand for each good. c. Show that the Slutsky equation applies to this function. d. Show that the elasticity form of the Slutsky equation also applies to this function. Describe any special features you observe
Consider a simple quasi-linear utility function of the form U(x, y)=x lny a…
Jun 15, 2020
numerade.com
SOLVED:Suppose that all consumers have quasilinear utility functions, so that vi(𝐩, mi)=νi(𝐩) mi . Let 𝐩^* be a Walrasian equilibrium. Show that the aggregate demand curve for each good must be downward sloping at 𝐩^* More generally, show that the gross substitutes matrix must be negative semidefinite.
SOLVED:Suppose that all consumers have quasilinear utilit…
Feb 17, 2020
numerade.com
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