Own-Price Changes What does a p, price-offer curve look like for Cobb-Douglas preferences?
Own-Price Changes What does a p1 price-offer curve look like for Cobb-Douglas preferences?
Own-Price Changes What does a p, price-offer curve look like for Cobb-Douglas preferences? Take U(x1,x2) X1X2 Then the ordinary demand functions for commodities 1 and 2 are
Own-Price Changes What does a p1 price-offer curve look like for Cobb-Douglas preferences? Take Then the ordinary demand functions for commodities 1 and 2 are U x x x x a b ( , ) . 1 2 = 1 2
Own-Price Changes a X1(p1,p2,y)= y a+b p1 and x2(p1,p,v-b y a+b p2 Notice that x, *does not vary with p, so the p, price offer curve is
Own-Price Changes x p p y a a b y p 1 1 2 1 * ( , , ) = + x p p y b a b y p 2 1 2 2 * ( , , ) = . + and Notice that x2 * does not vary with p1 so the p1 price offer curve is
Own-Price Changes a X1(p1,p2,y)= y a+b p1 and X2(P1, P2,y)=b y a+b p2 Notice that x, *does not vary with p, so the p, price offer curve is flat
Own-Price Changes x p p y a a b y p 1 1 2 1 * ( , , ) = + x p p y b a b y p 2 1 2 2 * ( , , ) = . + and Notice that x2 * does not vary with p1 so the p1 price offer curve is flat
Own-Price Changes a X1(p1,p2,y) y a+b p1 and X2(p1,p2,y) y a+b p2 Notice that x, *does not vary with p, so the p, price offer curve is flat and the ordinary demand curve for commodity 1 is a
Own-Price Changes x p p y a a b y p 1 1 2 1 * ( , , ) = + x p p y b a b y p 2 1 2 2 * ( , , ) = . + and Notice that x2 * does not vary with p1 so the p1 price offer curve is flat and the ordinary demand curve for commodity 1 is a