Suppose a consumer's income elasticities are constant and equal across all goods. (5) (a) What is the income elasticity for each good? Prove this result. (b) Suppose a consumer has a utility function which is a homothetic function. Show that the income elasticities have to be equal.
Suppose a consumer's income elasticities are constant and equal across all goods. (5) (a) What is the income elasticity for each good? Prove this result. (b) Suppose a consumer has a utility function which is a homothetic function. Show that the income elasticities have to be equal.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter6: Consumer Choices
Section: Chapter Questions
Problem 15CTQ: Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the...
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Suppose a consumer's income elasticities are constant and equal across all goods. (5)
(a) What is the income elasticity for each good?
Prove this result.
(b) Suppose a consumer has a utility function
which is a homothetic function. Show that
the income elasticities have to be equal.
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