ECN-601 – Microeconomics Assignment #1 Submission date: September 30th, 2015 1. If the utility function for two goods, X1, and X2 has a Leonteif Preferences Utility function of the from:
u ( x1 , x2 ) = min(ax1 , bx2 ) i.
Derive the Marshalian demand functions for X 1 and X2.
ii.
Derive the indirect utility function.
iii.
Perform a check on the Roy’s Identity.
iv.
Derive the expenditure function.
2. A consumer consumes X1 and X2 and the utility function is of the form:
u ( x1 , x2 ) = x1α , x21−α v.
Derive the MRS and show that the preferences are convexed.
vi.
Derive the Marshalian demand functions for X 1 and X2.
vii.
Derive the indirect utility function.
viii.
Show that the above demand functions are homogenous of degree zero in price and income.
ix.
Derive the expenditure function.
x.
Derive the Hicksian demand curve.
xi.
Using the Slutsky’s equation calculate substitution effect and the income effect of a change in price of X1.
3. d 4.