Explore BrainMass

# Marshallian demand functions

Not what you're looking for? Search our solutions OR ask your own Custom question.

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

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.

https://brainmass.com/economics/utility-demand/marshallian-demand-functions-10201

#### 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 ...

#### Solution Summary

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

\$2.49