Madonna buys only two goods.Her utility function is Cobb-Douglas.Her demand functions have which of the following properties?
A)Her demand for one of the two goods does not depend on income.
B)Her demand for neither good depends on income.
C)Her demand for each of the goods depends on income and on the prices of both goods.
D)Her demand for each of the two goods depends only on her income and on the price of that good itself.
E)One of the goods is an inferior good and the other is a normal good.

Question

Quizplus · Accepted Answer

Since Madonna's utility function is Cobb-Douglas, her demand is homothetic, meaning that her demand for each good depends only on her income and the price of that good itself. Therefore, her demand for each of the two goods depends only on her income and on the price of that good itself.

Madonna Buys Only Two Goods