# Degree of Homogeneity

• Jul 31st 2009, 10:05 AM
Apache
Degree of Homogeneity
I am asked to find the degree of homogeneity for this demand function

$X = AM^{2.04}P^{-1.3}$

This is what i have so far

$Xo = AMo^{2.04}Po^{-1.3}$

$X1 = A(\lambda Mo)^{2.04}(\lambda Po)^{-1.3}$

$= A\lambda^{2.04} Mo^{2.04} \lambda^{-1.3} Po^{-1.3}$

$= \lambda^{0.74} AM^{2.04}P^{-1.3}$

$\lambda^{0.74}Xo$

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 ?