University Of Ghana, Department of Economics

Econs 305: Applied Mathematics for Economist

Instructor: Dr. D. K. Twerefou
Problem Set 2: Concavity and Elasticity of Substitution
1. A production function of a firm is given by

q( x1 , x 2 )  2 x13  11x12 x 23

a. Find an expression for the Average product, Marginal product and the output
elasticity of the second input -

b. If x2  8 , find the Average product, Marginal product the output elasticity of the second
input at the point x1  15
1 1
2. The production function of a firm is given as: v( x1 , x2 )  102 x1 2 x2 2  3x1  4 x

a) Find the average product, marginal product and the output elasticity of the first input.
b) Find the value of x1 at which the marginal product is equal to the average product of the
first input x1 if the value of the second input x2  10

c) Evaluate the value of the average product, marginal product and the output elasticity of the
first input if x2  10 and at the value of x1 at which the marginal product is equal to the
average product.
1
1 2
3. Determine the nature of the isoquant of the function q( K , L)  10 K  2  1   L 2 
1
2 2 


4. Compute the elasticity of substitution of the function f ( L, K )  0.5 L0.3  0.5 K 0.3 
1
0 .3

5. Consider the Constant Elastic of Substitution function


f ( L, K )  A L   1   K   
1

where A  0, 0   ,   1 ,

(a) Find the first order differentials f K fL

(b) Find the second order differentials f KL f LL f KL

(c) Determine whether the function is concave or convex

(d) Determine the conditions under which the isoquant concave or convex
(e) Find the elasticity of substitution of the function
  
1

(b) The general CES production function is of the form y  k aL b  (1  a ) K  b b where L
and K are labour and capital respectively, 0 < a < 1, b > -1 and k > 0. Calculate the
marginal product, average product and hence the output elasticity of labour (L).

1 1
8. The monthly output of a company is given by the function Q  6 K 2
L 3

where K is the firm’s capital measured in machine hours

L is the size of the labour force in man-hour

(a) Find the Marginal Product of Capital ( MPK ) , and the Marginal Product of Labour ( MP1 ) .
(b) If the slope of the Isoquants which represents the rate of technical substitution is defined
as dK/dL, find the Marginal Rate of Technical Substitution (MRTS) for the given
production function.
(c) What would be the MRTS if Labour is 800 man-hours and Capital is 300 machine hours?
(d) Show that the Isoquant is convex.