NOTE – M4B

CHAPTER 5
1. z = f(x,y)
- 1st order derivative: fx; fy ∆x2 = MRCS x ∆x1
- 2nd order derivative: fxx; fyy; fxy = fyx - Q = f (K, L)
If K and L both change →the net change in Q can be
- The small increasement formula: found from the small increments formula:

- Implicit differentiation - Marginal rate of technical substitution

2. -
a) Partial elasticities. Euler’s theorem:
Q = f(P, PA, Y)
- Price elasticity of demand: 3. Unconstrained optimization
a) Find and classify stationary points of z = f (x, y)
- Cross – price elasticity of demand: - Find the stationary points:
- Solve the simultaneous equations
- Classify stationary points: (*)
fxx fyy – fxx and Figure
+ Positive: substitutable (fxy) 2 fyy
+ Negative: complementary
Minimum >0 >0 a
- Income elasticity of demand:
Maximum >0 <0 b
Saddle <0 c
+ Ey < 0 → inferior goods points
+ Ey > 0 → < 1: normal goods >1: superior b) Tìm giá trị của inputs để output max hoặc min
goods - Viết phương trình của output bằng các inputs
b) Marginal utilities.
Ex: 𝜋 = 1000Q1 + 800Q2 – 2Q12 – 2Q1Q2 – Q 22 (Output là
- The rate of change of U with respect to xi
𝜋, inputs là Q1 và Q2)
- Tìm các partial derivatives của tất cả các inputs
At the stationary point:
- Law of diminishing marginal utility: FQ1 = 0 Q1 =….
Does the law of diminishing marginal utility hold for FQ2 = 0 Q2 =…
this function? - Thế các giá trị Q1 và Q2 vào bảng (*) để chứng minh
 The partial derivative of marginal utility ∂U /∂x i
đó là điểm cực đại hoặc cực tiểu:
(the 2nd order partial derivatives) is negative
c) By the way, we have ….
- Marginal rate of commodity substitution Confirming that the output imaximized/minimized
at inputs

NOTE M4B NGÔ MINH TUYẾT NGỌC

c) Find the maximum profit of a firm that sells a
single good in different markets with price
discrimination.
- Problem: Firm sản xuất một lượng Q hàng hóa với
TC = … Bán ra 2 thị trường khác nhau với số lượng
và giá hàng hóa ở từng thị trường lần lượt là Q1, Q2
và P1, P2
→ Lúc này ta có 1 ptr TC và 2 ptr TR1; TR2 ứng với
từng thị trường
→ 𝜋 = (TR1+TR2) – TC
- Solution:
+ C4 (1 variable): Dùng hệ quả 𝜋 → MR = MC
+ C5 (2 variables): Viết ptr 𝜋 theo cả 2 biến: Q1; Q2
b) Application
→ Áp dụng phương pháp ở mục 2 để giải
! Note: Giải bài này theo biến Q1; Q2, không phải P1; P 2 F (x) TR TC Q C S
4. Constrained optimization f (x) MR MC MPL;MPK MPC MPS
- The firm maximises output subject to a cost - Y = C + S → MPC + MPS = 1
constraint: - ∫ f(x) = F(x) + c
+ MC → TC: c = Fixed cost
- The consumer maximises utility subject to a + Còn lại: c = 0
budgetary constraint.
2. Definite Integration
a) Consumer’s surplus
Use the method of substitution to solve
constrained optimisation problems in economics.

Problem: Use the method of substitution

for optimizing b) Producer’s surplus
z = f(x, y) subject to φ ( x , y ) = M
Solution
- Step 1: Use the constraint φ(x, y) = M to express y • Pure competition: Po = PD = PS; Qo = QD = QS
in terms of x.
c) Investment flow
(Dựa vào mối liên hệ của x, y để đưa ptr z về
1 variable) Calculate the capital formation during the time
- Step 2: Substitute this expression for y into the period from t = t1 to t = t2 we evaluate the definite
objective function z = f (x, y) to write z as a integral
function of x only.
- Step 3: Use the theory of stationary points of d) Discounting.
functions of one variable to optimise z. (Giải bằng
pp của chap 4) The fund is to provide a continuous revenue
stream for n years at an annual rate of S dollars per
CHAPTER 6 year → the present value can be found by
evaluating the definite integral
1. Indefinite Integration
CHAPTER 8
a) Find F(x)
NOTE M4B NGÔ MINH TUYẾT NGỌC
1. Problem: Maximise/ Minimise … subject to …
→Solution:
- Step 1: Sketch the feasible region.
- Step 2: Identify the corners of the feasible region and
fi nd their coordinates.
- Step 3: Evaluate the objective function at the corners
and choose the one which has the maximum or
minimum value.
Ex: Maximise 5x + 3y subject to 2x + 4y ≤ 8; x ≥ 0; y ≥ 0
- Step 1:
+ The non-negativity constraints x ≥ 0 and y ≥
indicate that the region is bounded by the coordinate
axes in Corner Objective function the positive
(0, 0) 5(0) + 3(0) = 0 quadrant.
+The (0, 2) 5(0) + 3(2) = 6 line 2x + 4y =
(4, 0) 5(4) + 3(0) = 20
8 passes
through (0, 2) and (4, 0). Also, at the test point (0, 0)
the inequality 2x + 4y ≤ 8 ⇔ 0 ≤ 8, which is true.
Hence, we are interested in the region below the line,
since this region contains the test point, (0, 0). The
feasible region is sketched in the figure below:
- Step 2: The feasible region is a triangle with three
corners, (0, 0), (0, 2) and (4, 0).
- Step 3:
a shortage of skilled labour, the total number of tablets
that the fi rm can produce in a week is at most 30. The
profit made on each device is $60 for TAB1 and $70 for
TAB2. How should the firm arrange production to
maximise profit?
Solution:
- Let the device of type TAB1 and TAB2 are x and y
respectively. (x ≥ 0, y ≥ 0)
- We have:
+ The cost of making each device of type TAB1 and
TAB2 are 120x and 160y respectively
→The total weekly production costs: 120x + 160y = 4000
+ The total number of tablets that the firm can
produce in a week is at most 30 means: x + y = 30
- The expression of the firm profit: 60x + 70y
- We evaluate the firm arrange production to maximise
profit by solving the problem:
Maximise 60x + 70y (profit) subject to 120x + 160y =
4000; x + y = 30; x ≥ 0; y ≥ 0

→The maximum value of the objective function is 20,

which occurs when x = 4 and y = 0.
2. Applications of linear programming
(1) Identify the decision variables and label them x and y .
(2) Write down an expression for the objective function
in terms of x and y , and decide whether it needs \
maximising or minimising.
(3) Write down all constraints on the variables, x and y
including the non-negativity constraints.
Ex: An electronics firm decides to launch two models of a
tablet, TAB1 and TAB2. The cost of making each device of
type TAB1 is $120 and the cost for TAB2 is $160. The firm
recognises that this is a risky venture so decides to limit
the total weekly production costs to $4000. Also, due to

NOTE M4B NGÔ MINH TUYẾT NGỌC

NOTE M4B NGÔ MINH TUYẾT NGỌC