Question: In Exercise 26, how does the maximum utility change if k is increased by 1 dollar? Data from Exercises 26 A consumer has k dollars
In Exercise 26, how does the maximum utility change if k is increased by 1 dollar?
Data from Exercises 26
A consumer has k dollars to spend on two commodities, the first of which costs a dollars per unit and the second b dollars per unit. Suppose that the utility derived by the consumer from x units of the first commodity and y units of the second commodity is given by the Cobb-Douglas utility function U(x, y) = xαyβ, where 0
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x = ka a and y = k b
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