Cobb-Douglas preferences

Summary

• Cobb-Douglas utility function

$$u\left( x_1,x_2 \right)=x_1^ax_2^b$$

• 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 $u=16$