Answer to Question #157951 in Microeconomics for paari

Question

Let 𝑓(𝑥1, 𝑥2) be a homothetic function. Show that its technical rate of substitution at (𝑥1, 𝑥2) equals its technical rate of substitution at (𝑡𝑥1,𝑡x2). Plot an isoquant map that displays this characteristic and provide some economic intuition for the meaning of this property.

Answer 1

Homothetic function at $F=1$

$X1/x2=tx1/tx2$

$=1$