Suppose your tastes over consumption and leisure have constant elasticity of substitution.I observe that, when your wage went up, you continued to work the same number of hours.From this, I can conclude that you have Cobb-Douglas tastes.

Question

Quizplus · Accepted Answer

If the number of hours worked remains constant despite a wage increase, it suggests that the substitution and income effects exactly offset each other, which is characteristic of Cobb-Douglas preferences where the elasticity of substitution is equal to one.

Suppose Your Tastes Over Consumption and Leisure Have Constant Elasticity