
Degree of Homogeneity
I am asked to find the degree of homogeneity for this demand function
$\displaystyle X = AM^{2.04}P^{1.3}$
This is what i have so far
$\displaystyle Xo = AMo^{2.04}Po^{1.3}$
$\displaystyle X1 = A(\lambda Mo)^{2.04}(\lambda Po)^{1.3}$
$\displaystyle = A\lambda^{2.04} Mo^{2.04} \lambda^{1.3} Po^{1.3}$
$\displaystyle = \lambda^{0.74} AM^{2.04}P^{1.3}$
$\displaystyle \lambda^{0.74}Xo$
I'm unsure as to whether this is correct, if it is would I be right in saying that the demand function is homogenous of a degree 0.74 ?