Answer to Question #245851 in Microeconomics for mariagh

Question

How can I analyze and find the Marshallian Demands of the following Utility function?

 𝑢(𝑥)=min⁡{𝑥1,𝑥2}𝑥3

I understand that goods x1 and x2 are perfect complements with each other, but what is the relation with x3?

Thank you

Answer 1

The perfect complements x1 and x2 would result in the perfect complements which would be consumed together to have utility. The utility is the want satisfying power of the commodity.

The goods x1, x2 and x3 are normal goods from which the consumer derives utility. The goods would result in the goods demanded by the consumers.

The demand functions x1, x2, x3 would result in the normal goods demanded by the consumers. The demand functions min{x1,x2} would be complements and the x3 would result in Cobb Douglas utility function to produce the output.

The cobb Douglas utility function implies that the goods could be increased to increase the utility. The utility function would result in the cobb Douglas function of labor and capital shares equal to 1.