For Marshallian Demand I got: x1 = (I-P2)/3P1 and x2=((2I - 2P2)/3P2) -1 is this

ID: 1179664 • Letter: F

Question

For Marshallian Demand I got:

x1 = (I-P2)/3P1 and x2=((2I - 2P2)/3P2) -1

is this correct? I did the Lagrangian. How would I calculate demand for x1 if I don't know the price of x1?

L = x1x2+x1+T(I-p1x1-p2x2)

differentiaating wrt x1 and then x2 and put to zero

x2+1-Tp1 = 0

x1-Tp2 = 0

(x2+1)/x1 = p1/p2

x2 = (x1p1/p2)-1................(1)

I = p1x1+p2x2

I = p1x1+x1p1-p2...............(using eqn 1)

I = 2p1x1-p2

x1 = (I+p2)/2p1 ............(marshillian demand fn for x1)

x2 = (I-p2)/2p2.............(marshillian demand fn for x2)

x1= (100+20)/2p1 = 60/p1

u do not need the value of p1 for making graph because it p1 will be given to you then no sense of making graph

now, just make graph between x1 and p1 from above eqn(x1 = 60/p1) it is a graph of type XY = constant(hyperbola)

please rate my answer..and give best answer rating..

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