In: Economics
consider a representative consumer with the utility function ?(?, ?) = ?? + ? and the budget constraint ??? + ??? ≤ ?. Assume throughout that all prices and quantities are positive and infinitely divisible.
Assume initially that ?? = ?? = 1 and ? = 10. Derive the consumers equilibrium cross-price elasticity between goods ? and ? and evaluate the value of this elasticity at the initial parameter values given .