We solve the 2 x 2 Ricardian model with a constant elasticity of substitution (CES) demand. Assume that the demand in country n of the goods i, Yni, is the result of the utility maximiza- tion: max [1.1)= + (ma) ( Ums** 2 s.t. Priyni + Pr2yn2 = where n = N, S indexes the country, and X, is the total expenditure of the country. 0 > 1 denotes the elasticity of substitution across goods. (a) Write down the Lagrangian function and solve for the optimal consumption bundle for country n. (b) The ideal price index is defined as the cost of one unit of utility. Show that with CES utility function, the price index takes the form: [(Pna) 1-0 + (P.2) loja