1. The consumer has Cobb-Douglas preferences for two goods x and y: u(x, y) = Py> 0 and m> 0 is given. a) Set up the Expenditure Minimization Problem. b) Calculate MU and MUy. 10x¾y³. px > 0, c) State the condition that explain why Cobb-Douglas preferences will guarantee an interior solu- tion. c) Give the two optimality conditions for x and y. i)

1. The consumer has Cobb-Douglas preferences for two goods x and y: u(x, y) = Py> 0 and m> 0 is given. a) Set up the Expenditure Minimization Problem. b) Calculate MU and MUy. 10x¾y³. px > 0, c) State the condition that explain why Cobb-Douglas preferences will guarantee an interior solu- tion. c) Give the two optimality conditions for x and y. i)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.10P

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Lara has preferences represented by the utility function U(x, y)  2x  2y. She consumes 10 units of good x and 6 units of good y. If her consumption of good x is lowered to 4, how many units of y must she have in order to be exactly as well off as before? The answer is 12 not sure how to get it
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