6. Euler’s theorem (one of many): A function ?(?1,?2,…,??) is
said to be homogeneous of degree k, if for any ? > 0,
?(??1,??2,…,???) ≡ ?^? ?(?1,?2,…,??)
a. Explain why a demand function ?(??,??,?) is homogeneous of
degree 0.
b. Using part a), prove the sum of the income elasticity and the
cross-price elasticity equals the price elasticity of demand. Hint:
differentiate the demand function identity in part a) with respect
to λ.