Purchase Solution

# Marshallian demand functions

Not what you're looking for?

Consider the problem of maximizing u = (x1x2)2 subject to p1x1 + p2x2 = y. Derive the Marshallian demand functions and the indirect utility function; and confirm that Roy's identity holds.

##### Solution Summary

Marshallian demand Functions and indirect utility functions are noted. Maximizing problems are examined.

##### Solution Preview

Consider the problem of maximizing u = (x1x2)2 subject to p1x1 + p2x2 = y. Derive the Marshallian demand functions and the indirect utility function; and confirm that Roy's identity holds.

Since we want to max U=(x1x2)2 subject to p1x1 + p2x2 = y
We can write the Lagrangian Function as:
L = (x1x2)2 - m (p1x1 + p2x2 - y)
Where m >= 0 to be determined
Then take the first order condition:
DL/dX1 = 2X1 X22 - mp1 = 0 or ...

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.