Economics

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

  • Economics -

    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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