ECON 301 Lecture Notes - Lecture 3: January 30

compute expenditure function from cobb-douglas utility function and quasi linear utility function.. show steps for both

Consider the following individual utility functions:

Adam Smith: U(x,y) = xy

Jeremy Bentham: U(x,y) = xayb (Cobb-Douglas utility function)

Alfred Marshall: U(x,y) = ln x + ln y

John M. Keynes: U(x,y) = x + yb (Quasi-linear utility function)

Joan Robinson: U(x,y) = aX + bY (linear; perfect substitutes)

Find demand functions for x and y for Smith, Bentham, Marshall, and Keynes. Assume that each man has income I and that the prices of x and y are px and py respectively.

If preferences over goods x and y can be represented by a Cobb-Douglas utility function, the income consumption curve is necessarily upward sloping.

True or False?