So I have a consumer with a utility function of the Cobb-Douglas form $v(x_1,x_2)=x^{\frac{1}{2}}_1x^{\frac{1}{2}}_2$.

From that I constructed the demand function for good 1 and good 2:
$x_1=\frac{1}{2} \cdot \frac{m}{p_1}$

$x_2=\frac{1}{2} \cdot \frac{m}{p_2}$

From here, I am to determine whether good 1 and good 2 are substitutes or complements. I was told by my teacher to take the derivative with respect to $m, p_1$ and $p_2$, however I can't get a sensible result. As far as I've come to understand from my book, I need to find $\frac{dx_1}{dp_2}$, the change in the demand for good 1 as the price of good 2 changes. Substituting m back to $p_1x_1+p_2x_2$ becomes messy as well. I understand the problem theoretically, but I simply can't figure out how to properly argue using math, rather than logic.

I hope someone is willing to help

  • 1
    $\begingroup$ Would be useful to tell us what you get for each step before it gets "messy." $\endgroup$ – Art Dec 11 '19 at 4:29

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.