Posted by **Bob** on Thursday, March 19, 2009 at 7:32am.

If utility is U(x,y) = xy + y, what is the indirect utility function and expenditure function?

- Economics -
**economyst**, Thursday, March 19, 2009 at 5:31pm
The answer to this takes several steps (and beyond what I am willing to do here).

first, calculate MUx and MUy, noting that for maximization MUx/MUy = Px/Py

Second, solve for Px*X or Py*Y. Plug this into the budget constraint equation I=Px*X + Py*Y. Rearrange terms to get X (or Y) by itself. This will be X* or X when utility is maximized. Ditty for Y*. Plug this X* and Y* into your utility equation and you are done.

Repost, showing your work and I, or others will critique.

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