Indifference Curves & Budget Constraint
Demand Curves (X and Y vs Price of X)
🎯 Price of X
Pₓ $2.00
Budget
Income (M) $100
Pᵧ $2.00
Utility Function Parameters
U(X,Y) = Xα · Y(1-α)
Optimal Bundle
X* 25.0
Y* 25.0
ΔY* when Pₓ↑ —
Zero Cross-Price Effect
Key Insight
Cobb-Douglas: Fixed expenditure shares mean Y* = (1-α)M/Pᵧ is independent of Pₓ. No cross-price effect!
Budget / X Demand
IC / Y Demand
Current Optimum