Vector Assessment

This assigned problem is a slightly modified version of Problem 5 (CES utility) of Consumer Theory I and prepares the demand structure in the climate change model.

1 Assigned Problem P1

Consider the expenditure minimization problem with CES preferences for clean and dirty goods, consumed in quantities and . Prices are and , giving a price vector p = (pc,pd). Consumption must at least yield utility of (C,D) ? C:

• 1. Solve for Hicksian demand functions. Show that they are linear in utility Calculate unit demand c(p) and d(p).
  2. Derive the expenditure function e(p,C)= e(p)C and show that e(p)=P, , see (ii).
  3. Compute the shadow price of the constraint u(C,D)>=C, giving(p)=e(P) , giving
  4. Show that the consumer budget is equal to price × quantity index,pcC+pdD=PC.

Are you struggling to keep up with the demands of your academic journey? Don't worry, we've got your back! Exam Question Bank is your trusted partner in achieving academic excellence for all kind of technical and non-technical subjects.

Our comprehensive range of academic services is designed to cater to students at every level. Whether you're a high school student, a college undergraduate, or pursuing advanced studies, we have the expertise and resources to support you.

To connect with expert and ask your query click here Exam Question Bank