Solving the utility maximization problem with CES and Cobb-Douglas utility function via mathematical inequalities

Vedran Kojić ()
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Vedran Kojić: Faculty of Economics and Business, University of Zagreb

No 1504, EFZG Working Papers Series from Faculty of Economics and Business, University of Zagreb

Abstract: This paper presents a new, non-calculus approach to solving the utility maximization problem with CES utility function, as well as with Cobb-Douglas utility function in case of n≥2 commodities. Instead of using the Lagrange multiplier method or some other method based on differential calculus, these two maximization problems are solved by using Jensen's inequlity and weighted arithmetic-geometric mean (weighted AM-GM) inequality. In comparison with calculus methods, this approach does not require checking the first and the second order conditions.

Keywords: Utility maximization problem; CES and Cobb-Douglas utility function; mathematical inequalities; without calculus (search for similar items in EconPapers)
JEL-codes: C69 D11 (search for similar items in EconPapers)
Pages: 11
Date: 2015-07-15
New Economics Papers: this item is included in nep-upt
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http://web.efzg.hr/repec/pdf/Clanak%2015-04.pdf First version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zag:wpaper:1504

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