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5) The Hicksian demand function can be related to the expenditure function by
Derivation
1) The expenditure function returns the cost-minimizing value for reaching a fixed level of utility at given prices . As such, it is the result of a constrained optimization problem:
with the FOCs:
for
where the resulting optimal are given by and the cost-minimizing expenditure is given by
2) Differentiate the optimal expenditure function with respect to using the Chain rule:
3) Replace by the FOC of the original optimization problem:
4) Differentiate the budget constraint FOC from (1) with respect to :
5) Inserting this optimality condition into (3), we get the result: