1. Consider the indirect utility function given by
   v(p1, p2,m) =m/(p1 + p2)
   What is the utility function u(x1, x2)?
2. A consumer has a utility function of the form

U(x1, x2) = u(x1) + x2

where good 1 is a discrete good (say, a car); the only possible levels of consumption of good x1 are x1 = 0 and x1 = 1. Suppose also that u(0) = 0 and p2 is normalized to one.

1. The consumer will definitely choose x1 = 1 if p1 is strictly less than what?
2. What is the indirect utility function?

3. Rick’s expenditure function is e (p, u). His demand for good j is xj(p,m) where p is the price vector and m > 0 is his income. Show that good j is a normal good for Rick if and only if \(\frac{{{\partial }^{2}}e}{\partial {{p}_{j}}\partial u}>0\)

Price: $6.96

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Deliverable: Word Document