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Set up the Lagrangian for a cost minimization problem, then use it to derive the Hicksian demands for goods X and Y when the utility function has the Cobb-Douglas form

U = X^alpha Y^1-alpha

You will do this by finding the levels of X and Y that minimize expenditure PxX+PyY subject to the constraint that utility not fall below

U^0

Substitute those Hicksian demands into the expenditure identity to derive the expenditure function for this Cobb-Douglas individual.

Note that I used the symbol "^" to show exponentiation (but you can use a Word file or whatever works for you).

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9292902

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