Five Minute Exercises > Price Change with Cobb-Douglas Preferences

Problem

Given:

A household has Cobb-Douglas preferences
Its demand for X is given by X = a*M/Px where a is a parameter
Last year, Px was $10, M was $100 and the household bought 4 units of X

Determine:

What would Px have to be for the household to increase its consumption of X to 8 units (with no change in income)?

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 11/10/2010