# Tag Info

## Hot answers tagged cobb-douglas

4

Demand is positive, so $A>0$. If $p_1$ goes to $\infty$, $x_1$ has to go to 0, since $p_1x_1$ is bounded by $M$. Thus $\alpha < 0$. If $p_2$ goes to 0, $x_1$ cannot go to $\infty$, since $p_1x_1$ is bounded by $M$. Thus $\beta\ge 0$. If $M$ goes to 0, $x_1$ has to go to 0, since $p_1x_1$ is bounded by $M$. Thus $\gamma > 0$. If both prices and ...

3

You question can be answered using a revealed preference argument. Let $B = \{q \in \mathbb{R}^n_+| p' q \le m\}$ be some budget set of a consumer (i.e. $B$ gives all possible bundles that the consumer can choose). Let $q^\ast$ be the optimal choice from $B$, i.e. the bundle that optimizes the utility. Then for any other bundle $q \in B$, it must be that $u(... 1 This will be a weird answer: As we know that$Q*P=const.$for Cobb-Douglas preferences. $$QP=const. \implies 0=d(PQ)=Q\ dP+P\ dQ \implies \frac{dQ}{Q}=-\frac{dP}{P}$$ thus we can conclude that$\frac{dQ/Q}{dP/P}$is always$-1\$.

Only top voted, non community-wiki answers of a minimum length are eligible