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Utility-maximization of a consumer with preferences

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Reference no: EM131224436

Consider the utility-maximization of a consumer with preferences

U(Dc;Df) = (Dc)^a(Df)^1-a; with 1< a<0 and a budget constraint of the form

PcDc+PfDf <-(less than or equal to) I=Income.

1. Solve for the marginal utility of consuming clothing, that is @U(Dc;Df)=@Dc.

2. Solve for the marginal utility of consuming food, that is @U(Dc;Df)/(Df/Dc)a/(1-a). Show your work.

4. Using the fact that MRS=-Pc=Pf and that PcDc+PfDf=I, solve for the demand for each good in terms of the prices and income.

Reference no: EM131224436

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