Charlotte87
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Homework Statement
Maximize C_{t} for any given expenditure level
\int_{0}^{1}P_{t}(i)C_{t}(i)di\equiv Z_{t}
The Attempt at a Solution
The Lagrangian is given by:
L = \left(\int_{0}^{1}C_{t}(i)^{1-(1/\varepsilon)}di\right)^{\varepsilon/(\varepsilon-1)} - \lambda \left(\int_{0}^{1}P_{t}(i)C_{t}(i)di - Z_{t}\right)
I know that the first order condition is
C_{t}(i)^{-1/\varepsilon}C_{t}^{1/\varepsilon} = \lambda P_{t}(i) for all i \in (0,1)
But I do not understand how they get to this answer. Can anyone help me?
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