Re: Demand function

Posted by shiva on Jun 14, 2017; 8:08am
URL: http://discussion-forum.276.s1.nabble.com/Demand-function-tp7605535p7605568.html

Check this!!

let us assume u = a +b where a =xy, b = wz,

pa = pxX+pyY, pb = pwW+pzZ

if pa < pb, demand of a = M/pa, budget equation pxX+pyY = M, if you solve these two you will get xy =1

therefore y = 1/x, when pa<pb. substitute this in the above budget equation pxX+pyY = M and solve for x.

which will give us the demand for x.