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FUNCTIONS OF SEVERAL VARIABLES

Applications
EXAMPLE ONE
𝜕𝑧 𝜕𝑧
(a) If 𝑍 = 𝑥 3 𝑦 − 𝑦 3 𝑥 evaluate and at the point (1,3) Hence
𝜕𝑥 𝜕𝑦
estimate the change in 𝑧 when 𝑥 increases from 1 to 1.1 and 𝑦
decreases from 3 to 2.8 simultaneously
𝜕𝑧 𝜕𝑧
(b) If 𝑍 = 𝑥𝑦 − 5𝑥 + 2𝑦 evaluate and at the point (2,6)
𝜕𝑥 𝜕𝑦
1. Use the small increments formula to estimate the change in 𝑧
as 𝑥 decreases from 2 to 1.9 and 𝑦 increases from 6 to 6.1.
2. Confirm your estimates of part (1) by evaluating 𝑧 at (2,6) and
(1.9, 6.1).
𝜕𝑦
(c) Use implicit differentiation to find the expressions for given that
𝜕𝑥
(i) 𝑥𝑦 − 𝑦 3 + 𝑦 = 0
(ii) 𝑦 5 − 𝑥𝑦 2 = 10
EXAMPLE TWO
Given the demand function
𝑄 = 100 − 2𝑃 + 𝑃𝐴 + 0.1𝑌
Where 𝑃 = 10, 𝑃𝐴 = 12 and 𝑌 = 1000, find the
(a) Price elasticity of demand
(b) Cross – price elasticity of demand
(c) Income elasticity of demand
Is the alternative good substitutable or complementary?

Tailoka Frank Patson Mathematical Analysis Academic year 2020 - 2021

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EXAMPLE THREE
Given the utility function
1 1
𝑈= 𝑥12 𝑥22

Find a general expression for MRCS in terms of 𝑥1 and 𝑥2 .

Calculate the particular value of MRCS for the indifference curve which
passes through (300, 500). Hence estimate the increase in 𝑥2 required to
maintain the current level of utility when 𝑥1 decreases by 3 units.

EXAMPLE FOUR
Given the production function
𝑄 = 𝐾 2 + 2𝐿2
Write down expression for the marginal products
𝜕𝑄 𝜕𝑄
and
𝜕𝐾 𝜕𝐿

Hence show that

2𝐿
(a) 𝑀𝑅𝑇𝑆 =
𝐾
𝜕𝑄 𝜕𝑄
(b) 𝐾 +𝐿 = 2𝑄
𝜕𝐾 𝜕𝐿

Tailoka Frank Patson Mathematical Analysis Academic year 2020 - 2021

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Unconstrained optimization
EXAMPLE FIVE
Find and classify the stationary points of the function
(a) 𝑓(𝑥, 𝑦) = 𝑥 3 − 3𝑥 + 𝑥𝑦 2 .
(b) 𝑓(𝑥, 𝑦) = 𝑥 2 + 6𝑦 − 3𝑦 2 + 10

EXAMPLE SIX
A firm is a perfectly competitive producer and sells two goods G1 and G2 at
K1 000 and K800 respectively, each. The total cost of producing these
goods is given by
𝑇𝐶 = 2𝑄12 + 2𝑄1 𝑄2 + 𝑄22
Where 𝑄1 and 𝑄2 denote the output levels of G1 and G2, respectively. Find
the maximum profit and the values of 𝑄1 and 𝑄2 at which this is achieved.
Constrained optimization
EXAMPLE SEVEN
(a) Find the minimum value of the objective function
Subject to the constraint 𝑦 = 2𝑥 − 1 .

(b) Find the maximum value of the objective function

𝑍 = 2𝑥 2 − 3𝑥𝑦 + 2𝑦 + 10
Subject to the constant 𝑦 = 𝑥.
EXAMPLE EIGHT
A firm’s unit capital and labour costs are K1 and K2 respectively. If the
production function is given
𝑄 = 4𝐿𝐾 + 𝐿2
Find the maximum output and the levels of 𝐾 and 𝐿 at which it is achieved
when the total input costs are fixed at K105. Verify that the ratio of
marginal product to price is the same for both inputs at the optimum.

Tailoka Frank Patson Mathematical Analysis Academic year 2020 - 2021

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Lagrange Multipliers
EXAMPLE NINE
Use Lagrange multipliers to find the optimal value of
𝑥 2 − 3𝑥𝑦 + 12𝑥
Subject to the constraint
2𝑥 + 3𝑦 = 6
EXAMPLE TEN
(a) Use Lagrange multipliers to find the optimal value of
2𝑥 2 − 𝑥𝑦
Subject to the constraint
𝑥 + 𝑦 = 12
(b) A monopolist producer of two goods, G1 and G2, has a joint total
cost function
𝑇𝐶 = 10𝑄1 + 𝑄1 𝑄2 + 10𝑄2
Where 𝑄1 and 𝑄2 denote the quantities of G1 and G2 respectively.
If 𝑃1 and 𝑃2 denote the corresponding prices then the demand
equations are
𝑃1 = 50 − 𝑄1 + 𝑄2
𝑃2 = 30 + 2𝑄1 − 𝑄2
Find the maximum profit if the firm is contracted to produce a
total of 15 goods of either type. Estimate the new optimal profit if
the production quota rises by one unit.

Tailoka Frank Patson Mathematical Analysis Academic year 2020 - 2021