7.9 In Example 7.2 we showed that with two goods the price elasticity of demand of a compensated demand curve is given by where sx is the share of income spent on good X and cr is the substitution elasticity. Use this result together with the elasticity interpretation of the Slutsky equation to show that:

a. if cr = 1 (the Cobb-Doublas case), ex,px+ eYyPy= -2.

b. if a > 1 implies ex,px + eYpY < — 2 and cr < 1 implies eXPx + eXPy > ~ 2. These results can easily be generalized to cases of more than two goods.