Answered step by step
Verified Expert Solution
Question
1 Approved Answer
18. In the above question, you can find the shape of Engel curve for good 1 for the Cobb-Douglas Preferences. Consider the general form, u(x,y)=xayb
18. In the above question, you can find the shape of Engel curve for good 1 for the Cobb-Douglas Preferences. Consider the general form, u(x,y)=xayb a. What is the definition of homothetic preferences? (you can write one of the two definitions in the lecture slide) y=kx b. This utility function represents homothetic preference? MRS=-Mux/Muy=-a/b x y/x c. Are quasi linear preferences homothetic? Explain your answer. Find MRS, you'll see its not homothetic. d. Are Engel curves straight lines if the consumer's preferences are homothetic? yes
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started