How individuals will allocate funds equally between x and y

Reference no: EM13239725

Given the CES utility function: U(X,Y)=((X^d)/d)+((Y^d)/d))

a. Show that the first-order conditions for a constrained utility maximum with this function require individuals to choose goods in the proportion: X/Y=(Px/Py)^1/(d-1)

b. Show that the result in part (a) implies that individuals will allocate their funds equally between X and Y for the Cobb-Douglas case (d=0)

Reference no: EM13239725

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