Answer to Question #81489 in Microeconomics for PIFOU Bianconeri

Question

Consider the utility function of the form:
U(x_1,x_2 )=〖(α_1 x_1^ρ+α_2 x_2^ρ)〗^(1/ρ)
Where ρ ≤ 1. Show that the demand curve is:
x_1^M=((α_1⁄p_1 )^σ M)/((α_1^σ p_1^(1-σ)+α_2^σ p_2^(1-σ) ) )
If σ is 1/(1− ρ).

Answer 1

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