Homogeneous Functions

A function f : Rn ! R is said to be homogeneous of degree k if

f (t~x) = tk f (~x) for any scalar t. The following result is one of many due to
Euler.

Theorem 1. Suppose f : Rn ! R is continuously di↵erentiable on Rn . Then

f is homogeneous of degree k if and only if
n
X @f (~x)
kf (~x) = xi (1)
i=1
@xi

for all ~x 2 Rn .

Proof. For any ~x 2 Rn , let g~x (t) = f (t~x) tk f (~x). Note that g~x = 0 for all
~x exactly when f is homogeneous of degree k. Suppose that equation (1) is
true. By the chain rule,
n
dg~x (t) X @f (t~x)
= xi ktk 1 f (~x)
dt i=1
@xi
n
!
1 X @f (t~x) k
= txi kt f (~x)
t i=1
@xi
1
= kf (t~x) ktk f (~x)
t
k
= g~x (t).
t
So g~x0 (t) = kt g~x (t), which means that y(t) = g~x (t) satisfies the first-order
di↵erential equation dy dt
= kyt . This equation has general solution y = Ctk , so
g~x (t) = Ctk . But g~x (1) = f (~x) f (~x) = 0, so C = 0 and thus g~x is identically
zero; hence f is homogeneous of degree k.

1
 Now suppose that f is homogeneous of degree k. Then g~x (t) is identically
zero, so g~x0 (t) = 0. But as above we have
n
X @f (t~x)
g~x0 (t) = xi ktk 1 f (~x),
i=1
@xi

so n
X @f (t~x)
xi = ktk 1 f (~x).
i=1
@xi
Set t = 1 to get equation (1).

Corollary 1. If f is homogeneous of degree k, then each partial derivative

@f
@xj
is homogeneous of degree k 1.

Proof. Suppose f is homogeneous of degree k. Then equation (1) is true,

and we can di↵erentiate both sides with respect to xj to get

X @ 2f n
@f @f
k = xj + , (2)
@xj i=1
@xj @xi @xj

where we have used the fact that

✓ ◆ ( @2f
@ @f xi , if i 6= j,
xi = @x j @xi
@2f @f
@xj @xi @2x j
x + @xj
, if i = j.
j

Now equation (2) is equivalent to

Xn
@ 2f @f
xi = (k 1) , (3)
i=1
@xi @xj @xj

@f
which by Theorem 1 implies that @xj
is homogeneous of degree k 1.

A homogeneous polynomial of degree k is a polynomial in which

each term has degree k, as in
2 3
x
f 4y 5 = 2x2 y + 3xyz + z 3 .
z

2
A homogeneous polynomial of degree k is a homogeneous function of degree
k, but there are many homogenous functions that are not polynomials. For
example,
x3 + x2 y + xy 2 + y 3
x2 + y 2
p
is homogeneous of degree 1, as is x2 + y 2 . Also, to say that g is homoge-
neous of degree 0 means g(t~x) = g(~x), but this doesn’t necessarily mean g is
constant: for example, consider

x x2 y 2
g = 2 .
y x + y2

1 Lagrange Multipliers
Now let f : Rn ! R be homogeneous of degree k. Suppose we want to find
the maximum or minimum of f subject to a linear constraint c1 x1 + c2 x2 +
· · · + cn xn = M . Lagrange’s equations are
@f
= ci , i = 1, 2, . . . , n.
@xi
Multiply by xi and sum on i to get
n
X n
X
@f
xi = ci xi
i=1
@xi i=1

Now by Euler’s theorem the left-hand side is kf , and the constraint equation
says the right-hand side is M . So = kf /M , and we have
@f kf (~x)
= ci , i = 1, 2, . . . , n. (4)
@xi M
Example 1. For example, suppose we want to minimize

f (x1 , x2 , x3 , x4 ) = x21 + x22 + x23 + x24

subject to the constraint 2x1 x2 + 4x3 + 5x4 = 20. Then f is homogeneous

of degree 2, and the equations (4) are
2f (~x) 2f (~x) 2f (~x) 2f (~x)
2x1 = 2, 2x2 = ( 1), 2x3 = 4, 2x4 = 5.
20 20 20 20
3
Then the constraint gives

f (~x)
(4 + 1 + 16 + 25) = 20,
20
so the minimum value is f (~x) = 20·20
46
= 200
23
, and this implies x1 = 20
23
,
10 40 50
x2 = 23 , x3 = 23 , and x4 = 23 .
Example 2. Suppose we want to maximize the Cobb-Douglas production
function
Y (K, L) = AK 1 ↵ L↵
subject to the constraint wL + pK = M . Since Y is homogeneous of degree
1, the equations (4) are

↵ AK 1 ↵ L↵ AK 1 ↵ L↵
(1 ↵)K L↵ = p and ↵K 1 ↵
L↵ 1
= w,
M M
or
1 ↵ p ↵ w
= and = ,
K M L M
that is,
(1 ↵)M ↵M
K= and L = .
p w

2 Homogeneous Functions and Scaling

The degree of a homogenous function can be thought of as describing how the
function behaves under change of scale. In thermodynamics all important
quantities are either homogeneous of degree 1 (called extensive, like mass, en-
ergy and entropy), or homogeneous of degree 0 (called intensive, like density,
temperature and specific heat).
In economics, the Cobb-Douglas production function

Y (K, L) = AK 1 ↵
L↵

gives output Y as a function of capital investment K and labor investment L.

(The exponent ↵ is empirically determined: it’s usually taken to be between
2
3
and 34 .) As noted above, Y is homogeneous of degree 1:

Y (tK, tL) = At1 ↵

K1 ↵ ↵
t L↵ = tY (K, L).

4
Another way of thinking about this fact is the following: if we increase both
capital and labor investments by some proportion (say 10%), the output Y
increases by the same proportion. Economists call this “constant returns to
scale”.
We note an immediate implication of constant returns to scale. If we look
at the per capita output Y /L, we have
✓ ◆
Y (K, L) LY KL
,1 K
= =Y ,1 ,
L L L

that is, per capita output depends only on the quantity of capital employed
by each worker.

3 Exercises
1. Give an example of a homogeneous function of degree 1. (Suggestion:
take a partial derivative of a nonconstant function of degree 0).

2. Show that, if f is homogeneous of degree 1, then the Hessian Hf (~x) is

degenerate at every ~x 6= ~0.

3. Maximize x3 y 2 z on the plane x + 2y + 3z = 6.

4. The constant elasticity of substitution (CES) production function is

1
Q(K, L) = c[(1 ↵)K r + ↵Lr ] r ,

where c, ↵, and r are constants. Show that the CES function is homogeneous
of degree 1.