Questions tagged [perfect-substitutes]
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3
questions
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1answer
20 views
Example of a (not quasi-linear) production function whose inputs are not perfect substitutes but are not asymptotic at the axes
I'm looking for an example of a family of production functions indexed by, say, rho, where the inputs become closer and closer to perfect substitutes as rho approaches 1, and yet, the marginal product ...
1
vote
1answer
68 views
Contradictory FOC and maximizing solution
I have to maximize the following function -
$\max_{x \in (0,1)} (((p_1x)^{2r} + (p_2(1-x))^{2r})/2)^{1/r}$
where, $p_1$ and $p_2$ are drawn from uniform distribution [0,1] and are considered to be ...
4
votes
1answer
145 views
Perfect substitutes and Lagrange
How does one solve utility maximization of perfect substitutes using Lagrangian function?
Consider the problem
$$\max_{x,y} ax +by $$
subject to the constraint that
$$px + qy \leq I$$
where $a,b,p,q,...
