Cobb-Douglas preferences
Summary
- Cobb-Douglas utility function
u(x1,x2)=xa1xb2
- If exponents sum to 1,a+b=1 , we call it a normalized Cobb-Douglas utility function
- Cobb-Douglas preferences: preferences derived from a Cobb-Douglas utility function
- Example: a=1/2 , b=1/2 and u=16