The choice of utility function depends on consumer
preference which then determines the market behaviour of the
market.
Suppose the utility function of a consumer Cobb-Douglas utility
function (CDF)
U(x1, x2) =
x13/5x13/5.
If p1 = p2 = 2 and I =
14
Question 2 - (30
marks)
Calculate and Illustrate the Income
and Substitution Effect when the price of good 1 inctease by
100%
(10 marks)
Calculate the Income Elasticity of
Demand for both goods when the income increase by 100% and
interpret your result.
(10 marks)
Calculate the Price Elasticity of
Demand for both Goods when the price increase by 100% and
interpret your result.
(10 marks)
it is trust me, copy and pasted straight from the source, one of your colleagues asked the same thing before they answered #1.
The choice of utility function depends on consumer preference which then determines the market behaviour of...
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