4.11 CES utility The CES utility function we have used in this chapter 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 1/(8–1) Px Py y 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 (d = 0), as we have shown before in several problems. ||

4.11 CES utility The CES utility function we have used in this chapter 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 1/(8–1) Px Py y 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 (d = 0), as we have shown before in several problems. ||

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.11P

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