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Assignment#2

Mathematical Economics
Please submit the assignment by 01:15 pm on Monday, 17th November 2014.
Answer all questions, even the ones from the part of the syllabus that is yet to be
covered.
Question1
Define and draw the upper contour sets of each of the following functions for the indicated values.
In each case, say whether the set is consistent with the functions being quasiconcave. :
(a) f (x, y) = xy for the value 1
(b) f (x, y) = x2 + y 2 for the value 1
(c) f (x, y) = x2 y 2 for the value -1
Question2
Let f be a function defined on a convex set U in <n . Show that the following statements are
equivalent to each other:
(a) f is a quasi-concave function on U .
(b) For all x, y U and all t [0, 1],
f (x) f (y) implies f (tx + (1 t)y) f (y).
(c) For all x, y U and all t [0, 1],
f (tx + (1 t)y) min{f (x), f (y)}.
Question3
Define the expenditure function. Prove that the expenditure function is concave and linear homogenous in prices.
Question4
Define the indirect utility function. Prove that the indirect utility function is non-increasing in
prices.
Question5
Define the firms production function, cost function and conditional factor demand, and explain
their relationship.
Question6
Let F be a convex function. By induction, show the following:
n
n
X
1X
F ( n1
yi )
F (yi ), n > 2
n i=1
i=1