Mathematics Exercises for Economists
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Powered by AITo find the equation of the tangent line to the curve z = xy at a point (a, b), we use the formula z - z0 = f_x(a, b)(x - a) + f_y(a, b)(y - b), where f_x and f_y are partial derivatives. At a point (a, b), the equation is z - ab = b(x - a) + a(y - b).
Utility maximization occurs where the marginal utility per dollar spent is equal across goods. Using the Lagrangian method for u(x, y) = xy with budget 40, set MRS = MU_x/MU_y = px/py. When prices change, the consumer reallocates spending to maintain this equality for maximum utility under budget constraints .
Maximizing profit involves setting prices such that the derivative of the profit function P(x, y) with respect to price is zero. Solve ∂P/∂x = 0 and ∂P/∂y = 0, keeping in mind revenue and cost functions: P = R_J(x, y) + R_O(x, y) - C(x, y). Adjust prices to balance demand fluctuations while minimizing costs .
Given the utility function u(x, y) = xy and a budget constraint of 40, the consumer maximizes utility by solving the Lagrangian: L = xy + λ(40 - 10x - 10y) under the condition a), with prices px = py = 10, leading to x = 2, y = 2. Under condition b) with px = 20, py = 10, solving results in x = 1, y = 2. The demand depends on equalizing the marginal rate of substitution to the price ratio .
The slope of level curves for z = xy is affected by changes in x and y, as dy/dx = -y/x. At different points, such as from (1, 2) to (2, 2), the slope changes from -2 to -1, showing a decrease in steepness, influenced by the relative values of x and y .
To find the critical point, we compute the partial derivatives of the function with respect to x and y. The partial derivatives are: ∂z/∂x = 40x - 37y + 31 and ∂z/∂y = -37x + 30y - 16. Setting both partial derivatives equal to zero, we solve the system of equations 40x - 37y + 31 = 0 and -37x + 30y - 16 = 0 to find the critical points .
To find the slope of level curves of the function z = xy, we first set z as a constant, c, meaning xy = c. Differentiating implicitly with respect to x yields y + x(dy/dx) = 0. Solving for dy/dx gives the slope as dy/dx = -y/x. At the point (1, 2), this becomes dy/dx = -2, and at the point (2, 2), dy/dx = -1 .
For Jordan and O'Neal shirts, changing prices affects sales as follows: increasing the price of Jordan shirts reduces sales by affecting the term -50x in the equation buyers = 40 - 50x + 40y, and similarly, increasing O'Neal shirt prices reduces sales due to -70y in buyers = 20 + 60x - 70y. These price changes impact consumer preference and overall sales .
The revenue functions are R_J(x, y) = x(40 - 50x + 40y) for Jordan shirts and R_O(x, y) = y(20 + 60x - 70y) for O'Neal shirts. The cost function is C(x, y) = 2(60 - 50x + 40y). The profit function is P(x, y) = R_J(x, y) + R_O(x, y) - C(x, y). The critical point is found by setting the partial derivatives of P with respect to x and y to zero, then solving the resulting system .
Cramer's rule involves calculating the determinant of the coefficient matrix and the determinants of matrices formed by replacing the coefficients of x and y with the constants from the equations. The determinants are D = 3(5) - (-7)(2), D_x = 13(5) - 11(-7), and D_y = 3(11) - 13(2). The solutions are x = D_x/D and y = D_y/D .