=+B. Suppose that tastes can be represented by the CobbDouglas utility function u1x1 ,x2 2 5 x1

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=+B. Suppose that tastes can be represented by the Cobb–Douglas utility function u1x1

,x2 2 5 x1 a

x2 112a2

a. Derive the demand functions when income is exogenous and illustrate that own-price demand curves slope down.

b. Now suppose that all income is derived from an endowment 1e1

,e2 2. If e2 5 0, what is the shape of the own-price demand curve for x1?

c. Continuing with part (b), what is the shape of the own-price demand curve for x1 when e2 . 0?

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Microeconomics An Intuitive Approach With Calculus

ISBN: 9781337335652,9781337027632

2nd Edition

Authors: Thomas Nechyba

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Question Posted: Nov 04, 2024 05:00 AM

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=+B. Suppose that tastes can be represented by the CobbDouglas utility function u1x1 ,x2 2 5 x1

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Microeconomics An Intuitive Approach With Calculus

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