How to Derive the Indirect Utility Function and Expenditure Function

Welcome back to Tierney #Education, where we break down economic models to make them clear and accessible. Today, we’re taking your #microeconomics knowledge to the next level by finding the indirect utility function and expenditure function from a Cobb-Douglas utility function. 📊 What's This Video About? In this tutorial, we walk through the two-step process for deriving the indirect utility function (V) and the expenditure function (E). We start with the Cobb-Douglas demand functions for goods X and Y, then plug those back into the direct utility function (U) to get the indirect utility function (V). Finally, we solve the indirect utility function for M (income) to find the expenditure function. 🔍 What Will You Learn? ▶️ Indirect Utility Function: Learn how to substitute optimal values of X and Y into the utility function to express utility as a function of prices (Px, Py) and income (M). ▶️ Expenditure Function: Rearrange the indirect utility function to express M as a function of utility (U) and prices (Px, Py). This function tells us the minimum amount of income required to achieve a given level of utility at specific prices. ▶️ Variable Overview: U = Direct utility V = Indirect utility Px = Price of good X Py = Price of good Y M = Income This video is ideal for students in intermediate microeconomics courses who want to master the core mathematical tools behind consumer theory. 🎓 About Me: At Tierney Education, we strive to simplify complex economic theories and principles. Whether you’re a student diving into microeconomics or just refreshing your knowledge, our videos are crafted to enhance your understanding and application of economic concepts. 🔔 Don't Forget to Subscribe! If this tutorial helped clarify indirect utility and expenditure functions, don’t forget to subscribe and hit the notification bell. We regularly post videos that break down complicated economic theories into manageable and understandable parts. 📣 Connect with Me: Do you have questions or want to see more content like this? Leave a comment below or visit tierneyeducation.com. You can also book a free consultation here: https://meetings.hubspot.com/james-tierney/initial-consultation-youtube #Economics #Microeconomics #CobbDouglas #IndirectUtility #ExpenditureFunction #EconomicTheory #Education #TierneyEducation #LearnEconomics #UtilityFunction #ConsumerTheory Thank you for tuning in. Stay with us as we continue to demystify economics, one concept at a time!