Euler's theorem (one of many): A function (1,2,...,) is said to be homogeneous of degree k, if for any > 0,

(1,2,...,) (1,2,...,)

a. Explain why a demand function (,,) is homogeneous of degree 0.

b. Using part a), prove the sum of the income elasticity and the cross-price elasticity equals the price elasticity of demand. Hint: differentiate the demand function identity in part a) wrt .