16/11/2020

Mathematics for Economics

Lecturer: Dr. Ngo My Tran

Lecture 5
Fuctions of many variables and
Multivariable Optimization

1
 16/11/2020

Contents
• Partial derivatives
• Economic applications
+ Marginal functions
+ Partial Elasticities
+ Multivariable optimization

Functions of Two Variables

• A function f of two real variables x and y with domain D is a rule that
assigns a specified number f (x, y) to each point (x, y) in D.

Partial Derivatives with Two Variables

2
 16/11/2020

Higher-Order Partial Derivatives

Problem: 11.2 (1,2,3,4,5 and 6 page 386)

Partial Derivatives with More Variables

Problem: 11.6 (1,2,4 and 6 page 403)

3
 16/11/2020

  f   2 f ''   f   2f ''
  2
 fxx (x, y)    fyx (x, y)
x  x  x  y   x   y x

  f   2f ''   f   2f ''
   fxy (x, y)    fyy (x , y)
x  y  xy  y   y   y y

Marginal functions
• Marginal products of capital, labour and land

• Other marginal functions

Problem: 11.7 (1, 2 page 405)

4
 16/11/2020

Partial Elasticities

Problem: 11.8 (1 page 408)

Review Problem: 11 (4, 5, 8, 9, 13 page 409)

10

5
 16/11/2020

• 15L2/5[(K + 1)1/5 − K1/5] is the extra output from 1 more unit of capital,
approximately equal to the marginal productivity of capital
• F(32 + 1, 243) − F(32, 243) is close to F’K (32, 243).

11

Profit maximization
• NECESSARY CONDITIONS FOR INTERIOR EXTREMA

12

6
 16/11/2020

SUFFICIENT CONDITIONS FOR A MAXIMUM OR MINIMUM

13

14

7
 16/11/2020

Problem: 13.1 (1, 3 and 4 page 465)

Problem: 13.2 (2 and 4 page 469)

15

16

8
 16/11/2020

The Lagrange Identifier Method (p499, 14.1)

17

Problem: 14.1 (1-5 page 502)

18