UP this part).Question 4Solving Consumer's Choice Problem under CD Utility, NumericalThe consumer with income Y has a preference represented by CD utility functionU(91,92) = 90.492.6.Given prices for the two goods, denoted by P₁, P2, solve the consumer's optimal choiceproblem following the steps below.(a) Write down the consumer's maximization problem, i.e be clear about (1) the choicevariables, (2) the objective function and (3) the constraint. mand(b) Write down the Lagrangian for this optimization problem.(c) Derive the three first-order conditions.IM gaitaluste(d) Solve for the optimal consumption bundles q1,92.(e) Plugging optimal consumption bundles q,q into U(91,92) to get the expressionfor indirect utility function, i.e. utility as a function of Y, P₁, P2.(f) Now we analyze the properties of demand. How does q respond to changes inP₁, P2 and Y? Specifically, does q increase or decrease if1. p₁ increases?2. p2 increases?3. Y increases?For simplicity, we only analyze qf, results for q2 are similar. (Hint: comparativestatics, calculateaqtдр1'etc.)s 101 2AM gaidelis

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Question 4 Solving Consumer's Choice Problem under CD Utility, Numerical The consumer with income Y has a preference represented by CD utility function 0.4 0.6 U(91,92) = 914926 Given prices for the two goods, denoted by P₁, P2, solve the consumer's optimal choice problem following the steps below. (a) Write down the consumer's maximization problem, i.e be clear about (1) the choice variables, (2) the objective function and (3) the constraint. (b) Write down the Lagrangian for this optimization problem. (c) Derive the three first-order conditions.

Question 4 Solving Consumer's Choice Problem under CD Utility, Numerical The consumer with income Y has a preference represented by CD utility function 0.4 0.6 U(91,92) = 914926 Given prices for the two goods, denoted by P₁, P2, solve the consumer's optimal choice problem following the steps below. (a) Write down the consumer's maximization problem, i.e be clear about (1) the choice variables, (2) the objective function and (3) the constraint. (b) Write down the Lagrangian for this optimization problem. (c) Derive the three first-order conditions.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter21: Demand: Consumer Choic

Section: Chapter Questions

Problem 1E

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