All Questions
4 questions
3
votes
1
answer
156
views
How can I solve a Utility Maximization problem using the Lagrangian method where the Utility formula has an exogenous constant $a$?
The utility function is given by: $$u(x, y) = 2x^{\frac{1}{2}} + 2ay^{\frac{1}{2}}.$$
The optimal bundle should be expressed as a function of $a$. Other variables are given by:
$$\begin{eqnarray*}\...
- 31
4
votes
1
answer
692
views
Concave utility functions solution example
In the following post an example is given of the corner solution for a concave utility function. I tried solving it but got stuck. I have no idea how these types of problems are solved so if you could ...
- 43
1
vote
1
answer
99
views
Lagrangian when ICs are tangent to the budget line
Suppose the graph below shows three Indifference Curves such that $t > s > r$, and the budget line $p_1x + p_2y = I$. I was wondering if we set the Lagrangian as $\mathcal{L}= U(x,y) - \lambda (...
- 244
0
votes
1
answer
655
views
Calculate hicksian demand with utility function (with restriction)
$U(x_1, x_2) = 1/2 * x_1 $
I am trying to calculate the Hicksian demand when when $U(x_1, x_2) = 2$ and the value of the minimum expenditure when $p_1 = 9$ and $p_2 = 16$
For the hicksian demand I ...
- 13