ECON 100A Lecture 20: ECON 100A 11-7-2016
Document Summary
Min q1, q2 p1q1 + p2q2 s. t. = p1q1 + p2q2 (u(bar) u(q1, q2)) / p1 = p1 u1(q1, q2) = 0. / p2 = p2 u2(q1, q2) = 0. / = u(bar) u(q1, q2) = 0. E (p1, p2, u(bar)) = p1 x1. Expenditure function: e / p1 = x1, e / p2 = x2 c (p1, p2, u(bar)) hicksian demand for good 1 c (p1, p2, u(bar)) hicksian demand for good 2. E = u (bar) (p1 / ) (p2 / (1 )) 1 - . Hicksian demand for good 1: differentiate with respect to p1 c = e / p1 = u(bar) * p1, q1 (1- ) * p2 / p1) 1- . 1 / * (p2 / (1 )) 1 = u(bar) ( / Hicksian demand for good 2: differentiate with respect to p2 c = e / p2 = u(bar) * (p1, q2 ((1- ) / * p1 / p2.
