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I need to optimize in accordance with a budget constraint. I have the MRS solved as equal to ((ax^(p-1))/((1-a)(y^(p-1)))) and a normal budget constraint of p1x + p2y = m. I can't seem to find a...

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I need to optimize in accordance with a budget constraint. I have the MRS solved as equal to ((ax^(p-1))/((1-a)(y^(p-1)))) and a normal budget constraint of p1x + p2y = m. I can't seem to find a optimal point by combining those two.
Answered Same Day Dec 22, 2021

Solution

David answered on Dec 22 2021
132 Votes
I need to optimize in accordance with a budget constraint. I have the MRS solved as equal to
((ax^(p-1))/((1-a)(y^(p-1)))) and a normal budget constraint of p1x + p2y = m.
Answer:
Normal budget constraint of p1x + p2y = m
At the optimal consumption point:
((ax^(a-1))/((1-a)(y^(a-1)))) =...
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