Questions c) and d) 4.11 CES utilityThe CES utility function we have used in this chapter is given byU(x, y) =a. Show that the first-order conditions for a constrained utility maximum with this function require individuals to choosegoods in the proportion1/(8–1)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 (ô = 0), as we have shown before in several problems. c. How does the ratio p,x/p,y depend on the value of ö? Explain your results intuitively. (For further details on this function,see Extension E4.3.)d. Derive the indirect utility and expenditure functions for this case and check your results by describing the homogeneityproperties of the functions you calculated.

Answered: Image /qna-images/answer/72388fff-2b7f-47f3-8bf5-196c22028baa.jpg

c. How does the ratio p,x/p,y depend on the value of ö? Explain your results intuitively. (For further details on this function, see Extension E4.3.) d. Derive the indirect utility and expenditure functions for this case and check your results by describing the homogeneity properties of the functions you calculated.

c. How does the ratio p,x/p,y depend on the value of ö? Explain your results intuitively. (For further details on this function, see Extension E4.3.) d. Derive the indirect utility and expenditure functions for this case and check your results by describing the homogeneity properties of the functions you calculated.

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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