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COURSE: 16-5-2015
Function
q(K,L)=
KL
KL
1
Concave
Quasi-Concave
YES
YES
U(X,Y)= X 2Y 4
1
q(K,L)= K 3 L3
3 XY
3X Y
q(K,L)= K 2 L2
U(X,Y)=
Problem 2.
Given the primal production problem:
Min C(K,L)=2K+3L
u.c. 100= K L .
a.
Derive the formula of the iso-quant L=g(K) from the constraint 100= K L .
b.
Has this problem a unique optimal solution (Kopt,, Lopt) ? Give arguments!
c.
Problem 3.
Given the primal production problem:
Min C(K,L)=3K+L
1
u.c. 100= K 3 L3 .
1
a.
Derive the formula of the iso-quant K=h(L) from the constraint 100= K 3 L3 .
b.
Has this problem a unique optimal solution (Kopt,, Lopt) ? Give arguments!
c.
Problem 4.
Given the dual consumption problem:
2
Max U X 3 Y 3
u.c. 200=X+2Y
a.
b.
MATHEMATICAL ECONOMICS
COURSE: 16-5-2015
Function
q(K,L)=
Homogeneous
Degree
YES
KL
KL
1
2
U(X,Y)= X Y
1
3
2
1
q(K,L)= ( K 3 L3 ) 2
3 XY
3X Y
2
q(K,L)= K L2 +q0
U(X,Y)=
Problem 2.
Given the primal production problem:
Min C(K,L)=2K+3L
u.c. q0= K L .
a.
b.
Calculate
c.
dCmin
by using chain rule of functions of several variables.
dq0
(Chapter 12 pg 414 or syllabus pg 15).
Problem 3.
Given the primal production problem:
Min C(K,L)=3K+L
1
u.c. q0= K 2 L2 .
a.
b.
Calculate
c.
dCmin
by using chain rule of functions of several variables.
dq0
Verify if the functions C(K,L) and q(K,L) are homogeneous of degree 1.
d.
MATHEMATICAL ECONOMICS
COURSE: 16-5-2015
Extra problems: Compensated and uncompensated demand functions (Section 9 and 10)
Problem 1
Given the primal consumption problem:
Min E(X,Y)=PX X+PY Y
2
u.c. u X 3 Y 3
0
a.
b.
Calculate E(Xcomp ,Ycomp) =E min =W(PX, PY , u0.) the indirect expenditure function.
Problem 2.
Given the dual consumption problem:
2
Max U X 3 Y 3
u.c. e0=PX X+PY Y
a.
b.
Extra problems: Symmetry between primal and dual problems (Section 11)
Problem 1
Given the primal consumption problem:
Min E(X,Y)=PX X+PY Y
1
u.c. u X 4 Y 2
0
a.
b.
Calculate E(Xcomp ,Ycomp) =E min =W(PX, PY , u0.) the indirect expenditure function.
c.
d.
e.
MATHEMATICAL ECONOMICS
COURSE: 16-5-2015
Test problems.
Problem 1.
In a consumption context the following functions are given.
The utility function U ( X , Y ) 2 ln( X ) ln(Y ) with X>1, Y>1, and the expenditure function
E ( X , Y ) PX X PY Y . We assume that the consumer acts optimal.
Questions:
a.
Show that the uncompensated demand function for good X is
2TEgiv
X unc d X ( PX , PY , TEgiv )
.
3PX
4(TEgiv )3
b.
c.
d.
Formulate the Slutsky relation for cross-price effects concerning the demand for good
X in terms of elasticitys. Verify this relation by computing all the elements of this
relation.
e.
.
2
27(
P
)
P
X
Y
hX ( PX , PY , U giv ).
Problem 2.
In a production context the following functions are given.
1
b.
2 3 TCgiv
.
1
2
3
3
3PK PL
c.
d.
e.
f.