1. Outline for Tuesday, July 22
Remember
Homework due Friday
Midterm Monday
Read 6.2-6.4 for tomorrow
Quiz
Review Monday
PCC and ICC curves
The income and substitution effects

2. Quiz 2
Ends at 11:35
Read carefully
Raise your hand if you have questions
This is not the end of today’s class

3. Outline for Tuesday, July 22
Remember
Homework due Friday
Midterm Monday
Read 6.2-6.4 for tomorrow
Quiz
Review Monday
PCC and ICC curves
The income and substitution effects

4. Cobb-Douglas functions
U = XAYB MU X = AX A −1Y B MU Y = BX A Y B−1

5. Cobb-Douglas functions
U = XAYB MU X = AX A −1Y B MU Y = BX A Y B−1
A constant share of income goes to each good
A I B I
X* = ⋅ Y* = ⋅
A + B PX A + B PY