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[Solution Library] Individuals consume three breakfast goods - cereal q 1 , kippers q 2 and eggs q 3 . You model preferences by an indirect utility function v(y,p)=(y)/(√p_1)(p_2+p_3)

Question: Individuals consume three breakfast goods - cereal q 1 , kippers q 2 and eggs q 3 . You model preferences by an indirect utility function

\[v\left( y,p \right)=\frac{y}{\sqrt{{{p}_{1}}\left( {{p}_{2}}+{{p}_{3}} \right)}}\]

where y denotes total breakfast spending and \[\left( {{p}_{1}},{{p}_{2}},{{p}_{3}} \right)\] are the prices of the three goods.

  1. What is the expenditure function?
  2. What are the Hicksian demands?
  3. What are the Marshallian demands?
  4. Are preferences homothetic? How can you tell?
  5. Which pairs of goods would you regard as substitutes and which as complements?

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