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 \(u=16\)