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I've been sitting here all afternoon trying to show that if we have a function:

$u(x) = x^{\alpha}y^{\beta}$ and I maximize it subject to:

i) $x \ge 0$
ii) $y \ge 0$
iii) $p_1x + p_2y = w$

Then I get: $x = \frac{\alpha w}{p_1}$ and $y = \frac{\beta w}{p_2}$

I've been using the lagrangian to optimize this and have got to this point:

$x = \frac{ \alpha(p_1x-p_2+w)}{p_1+p_1x}$

I don't know if I'm being stupid or what but I can't seem to find this relationship.

If anyone can give me steps on this I would be grateful.

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  • $\begingroup$ is this $u(x)$ or $u(x,y)$? $\endgroup$ – Dr. Sonnhard Graubner Oct 24 '15 at 16:00
  • $\begingroup$ I assume you mean that $\alpha + \beta =1$? $\endgroup$ – Chris Kerridge Oct 24 '15 at 16:11
  • $\begingroup$ Well it's not given in the question that beta = 1 - alpha but it has to right?? And yes this is u(x,y) $\endgroup$ – gloveman998 Oct 24 '15 at 16:19
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If $p_1 x + p_2 y = w$ then solve for $y$ and substitute to turn it into a problem that can be solved with basic calculus finding solutions to $\frac{du}{dx} = 0$.

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