The "War on Poverty" was declared by President Ronald Reagan in 1982

Rachel spends her income, Y, on Rock Shows (R) and Sunglasses (S) with prices pR and pS. Rachel's preferences are given by the Cobb-Douglas utility function

U(X,Y) = R.8S.2 a. Write out the Lagrangian for Rachel's utility-maximization problem. b. Use the Lagrangian to derive Rachel's optimal choice, (R*,S*). c. For a given utility level, U0, derive Rachel's Expenditure function E(pR,pS,U0). d. Use the Expenditure function to derive Rachel's compensated demand for Rock Shows.

Refer to Figure 2.1. At point D, demand is:

A) completely inelastic. B) inelastic, but not completely inelastic. C) unit elastic. D) elastic, but not infinitely elastic. E) infinitely elastic.