Consider the utility function of U(X,Y) = X^0.2Y^0.4 Show that Slutsky equation holds Show that ex,px+ex,py+ex,l=0. What does it mean? Show that Engle Aggregation holds. What does it mean? Show that Cournot Aggregation holds. What does it mean?

Consider the utility function of U(X,Y) = X^0.2Y^0.4 Show that Slutsky equation holds Show that ex,px+ex,py+ex,l=0. What does it mean? Show that Engle Aggregation holds. What does it mean? Show that Cournot Aggregation holds. What does it mean?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.12P

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Concept explainers

Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.

Question

Consider the utility function of U(X,Y) =
ΧΛΟ.2YΛΟ.4
Show that Slutsky equation holds
Show that ex,px+ex,py+ex,l=0. What does it
mean?
Show that Engle Aggregation holds. What
does it mean?
Show that Cournot Aggregation holds. What
does it mean?

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Step 1: Define Utility function

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Step 2: Show that Slutsky equation holds

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Step 3: Verify the equation equal to 0

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Step 4: Verify the Engle aggregation

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Step 5: Show that Cournot Aggregation holds

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