Question

I need step by step solution to the following this question asap .I have limited time so please do it quickly with detailed explanation

thanks in advance/Ha

Kim has the utility function U(x1,x2=x," x2' and derive expressions for the Marshallian demands for goods x and x2 Can you say anything about the share of income that Kim spends on good x x,? How will this share change with changes in prices p, and p2 4 Set up Kim's maximization problem and (15p)

Answer 1

Answer Maximize : subject to i - U= x 2 7,24 + PzXy y where y = Income. (1) 314 32, Legrange is given by : h = 28thly-pia, - P2 % 2 ) first order Condition: obce +(3:1) = AP, => (2) aL 20 7 31 27 = Lb (3) 22 Dividing (2) from (3) we get Mus_P = Po 22 = 3P, 2, Putting this in (1) we get 37, RP2 Pex, + 3P X = Y = 2F (4) mashtra demand => X = 3 px = - Py4 3/4 (Pg X and X Shore of Income Speed of x = Piz =) )

Charl of Income Spend on az = p X = 0 = 3/4 We can see from above that there share of Income Spend on x, and a are independent of P, and P2 & is come haut thus affect Ta change in p ris share of and 22 and l income will not spent on