Posted by Jeb on Thursday, March 19, 2009 at 7:30am.
If utility is U(x,y) = x^0.3 y^0.7 (i.e x* = 0.3I/Px and y* = 0.7I/Py). What is the indirect utility function and expenditure function?
Economics - economyst, Thursday, March 19, 2009 at 2:09pm
You are almost already there. Getting x* and y* is the hard part.
The indirect utility function is:
v(Px,Py,I) where I is income
Simply substitute your x* and y* in the original utility equation
maximum U = (0.3I/Px)^.3 * (0.7I/Py)^.7
=(.6968I^.3)/Px^.3 * (.7791I^.7)/Py^.7
= (.5428 * I)/(Px^.3 * Py^7)
I presume for the expenditure function you want the functional form E(Px,Py,U). We know I=PxX + PyY. Here, simply use the above equation and get income-I all by itself.
I = (U * (Px^.3 * Py^.7))/.6968
I hope this helps
Economics - economyst, Friday, March 20, 2009 at 8:58am
I = (U * (Px^.3 * Py^.7))/.5428
Answer This Question
More Related Questions
- Economics - If utility is U(x,y) = xy + y, what is the indirect utility function...
- economics - Suppose a person has a utility function U=YX. What is the minimum ...
- economics - 1.. Suppose that U(x; y) = min(x; y) with px = 1 and py = 1. ...
- Economics - Ive been stuck on this forever now if someone could please walk me ...
- microeconomics - Suppose a person has a utility function U=YX. What is the ...
- Economics - Luis’s utility function is u=x^.4y^.6 Suppose that Luis wants to get...
- Micro econ - 1: Suppose John had a utility function of U=X^2/3Y^1/3 . Derive ...
- marketing - how are: goods services utility form utility place utility time ...
- economics - Consider a consumer who has an experienced utility function given ...
- economics math - Consider a consumer who has an experienced utility function ...