ECON 134A Midterm: ECON 134A UCSB Test2D 2011Spring
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Some formulae are provided in the appendix (that you may or may not need). A1. (20 points) true or false: the expenditure function is homogenous of degree 1 in. A2. (20 points) a cost function has the form c(w, y) = aw . 2 y: find the conditional input demands, show that the input shares si as the proportion of total expenditure are independent of the scale of production. A3. (20 points) demonstrate the following property of demand (engel aggregation): n. X i=1 si i = 1, where si = pixi/y and i is income elasticity of demand for good i. B1. (20 points) true or false: the conditional input demand function is homogeneous of degree 0 in prices and output ( w , y). Justify your answer. (suggestion: use a graphic with two types of goods, i. e. n = 2. )
