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Which of the following statements is correct for an individual who consumes the two goods X and Y? O a. The expenditure funct

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Answer #1

Answer- Correct option is 'd'

a) The expenditure function is homogeneous of degree one in prices and utility. If u(x) is continuous, strictly quasi-concave and non-satiated, then the associated cost (expenditure) function c(p,u) is homogeneous of degree 1 in p, concave, strictly increasing u, and has a partial derivatives which are the compensated (Hicksian) demand functions.

b) The hicksian demand functions for x and y are homogeneous of degree zero in prices. Homogeneity of degree zero in p follow because the optimal vector. The minimizing p.x is subject to u(x)>=u.

c) The marshallian demand function are homogeneous of degree zero in prices. If all the prices and the consumer's income are multiplied by any number t > 0 then his demand for goods stay the same.

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