1.
Outline for Monday, July 21
Remember
Quiz tomorrow
Homework due Friday
Review Friday – finding the optimum
Questions about the hw or quiz?
Cobb-Douglas functions
ICC and PCC interpretation
2.
Finding the optimum (X*,Y*)
There are two unknowns, so we need two equations
3.
Finding the optimum (X*,Y*)
There are two unknowns, so we need two equations
You should know how to solve…
Typical case Expenditure = Income Slopes match
Perfect substitutes Expenditure = Income Buy X OR Y
Perfect complements Expenditure = Income Buy X and Y together
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