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Question: consider the cobbdouglas utility function uxy let the budget constraint...

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Consider the Cobb-Douglas utility function u(x,y)-ґуг. Let the budget constraint be pPy-I, where pa,Py are the prices and I denotes the (a) Write the Lagrangian for this utility maximization problem (b) Solve the first-order conditions to find the demand functions for both good r and good y. [Hint: Your results should only depend on the pa- rameters p, Py, I.] (c) In the optimal consumption bundle, how much money is spend on r? How much on y? Express your answer in proportion of the total income I. (d) OPTIONAL: Check the second order conditions.

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