The n-good Cobb-Douglas Function Sara Sutherland University of California, Santa Barbara April 29th, 2011

Derive the Walrasian demand for the n-good Cobb-Douglas production function: Y=AΠn xαi i=1 i where A > 0 and Σn αi = 1 i=1

Using MRTS:
p i α i xj p j = α j xi αi xi pi = αj xj pj

Substituting xi pi bXKinto the Budget Constraint: y= Σn xi pi i=1
αi y=Σn αj xj pj = i=1 p j xj αj Σαi

y=

p j xj αj

i xj (p, y) = ppαi j

Solving for xj (p, y): 1) Set M RT Si = M RT Sj 2) Solve for pi xi 3) Plug back into budget Constraint 4) Solve for xj (p, y)

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