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Economists often say that goods tend to have more elastic demand when they have lots of close substitutes. Use the CES utility function U(x, y) = α + (1 − a)² to show that the own-price elasticity of demand for good X gets larger (in absolute value) as the elasticity of substitution gets larger. x8

Economists often say that goods tend to have more elastic demand when they have lots of close substitutes. Use the CES utility function U(x, y) = α + (1 − a)² to show that the own-price elasticity of demand for good X gets larger (in absolute value) as the elasticity of substitution gets larger. x8

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
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. Economists often say that goods tend to have more elastic demand when they have lots of close χδ = α + (1 - a) substitutes. Use the CES utility function U(x, y) to show that the own-price elasticity of demand for good X gets larger (in absolute value) as the elasticity of substitution gets larger.
Transcribed Image Text:. Economists often say that goods tend to have more elastic demand when they have lots of close χδ = α + (1 - a) substitutes. Use the CES utility function U(x, y) to show that the own-price elasticity of demand for good X gets larger (in absolute value) as the elasticity of substitution gets larger.
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