4.9 The general CES utility function is given by U(X, Y ) . a. Show that...

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4.9 The general CES utility function is given by U(X, Y ) .

a. Show that the first-order conditions for a constrained utility maximum with this function require individuals to choose goods in the proportion

b. Show that the result in part

(a) implies that individuals will allocate their funds equally between X and Y for the Cobb-Douglas case ( 0), as we have shown before in several problems.

c. How does the ratio PXX/PYY depend on the value of ? Explain your results intuitively.

(For further details on this function, see Extension E4.3.)

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Microeconomic Theory Basic Principles And Extensions

ISBN: 9780324270860

9th Edition

Authors: Walter Nicholson

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Question Posted: Nov 12, 2024 03:01 AM

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4.9 The general CES utility function is given by U(X, Y ) . a. Show that...

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