Question

In: Economics

How can I prove that perfect substitutes utility function and perfect complements utility function are homothetic...

How can I prove that perfect substitutes utility function and perfect complements utility function are homothetic functions?

Solutions

Expert Solution

A function is HOMOTHETIC if it can be represented as a monotonic transformation of a function that is Homogeneous of Degree 1 i.e. HOD(1).

Since utility functions for perfect substitutes and perfect complements are HOD(1), they are automatically homothetic;



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