Chapter 2.

Functions of Several Variables and

Applications

Assoc. Prof. Dinh Nguyen Duy Hai

Faculty of Data Science in Business

Ho Chi Minh University of Banking

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 1 / 66
 Contents

1 Functions of Several Variables

2 Limits and Continuity

3 Partial Derivatives

4 Total Differential

5 Chain Rules

6 Extrema of Functions of Two Variables

7 Lagrange Multipliers

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 2 / 66
 2.1 Functions of Several Variables

Definition 1 (Function of two variables)

A function f of two variables is a rule that assigns to each ordered pair of
real numbers (x, y ) in a set D a unique real number f (x, y ). The set D is
called the domain of f and its range is the set of values that takes on, i.e.,

R = {f (x, y )|(x, y ) ∈ D} .

Notation. Function f of two variables

z = f (x, y )

The variables x and y are independent vari-

ables and z is the dependent variable.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 3 / 66
 If a function f (x, y ) is given by a formula and no domain is specified, then
the domain of f

D = (x, y ) ∈ R2 : f (x, y ) is well-defined .



Example 2
For each of the following functions, evaluate f (3, 2) and find the domain
√
x +y +1
(b) f (x, y ) = x ln y 2 − x


(a) f (x, y ) =
x −1

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 4 / 66
 Graphs

Definition 3 (Graph of Functions of Two Variables)

If f is a function of two variables with domain D, then the graph of f

Gf = (x, y , z) ∈ R3 : z = f (x, y ) and (x, y ) ∈ D .



The graph of a function f of two variables is

a surface S with equation z = f (x, y ).

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 5 / 66
 2.2 Limits and Continuity
Let us consider the behavior of the functions
sin(x 2 + y 2 )
f (x, y ) = as (x, y ) → (0, 0).
x2 + y2

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 6 / 66
 Let us consider the behavior of the functions
x2 − y2
g (x, y ) = as (x, y ) → (0, 0).
x2 + y2

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 7 / 66
 Definition 4 (Limit of a function of two variables)
We write lim f (x, y ) = L to indicate that
(x,y )→(x0 ,y0 )

f (x, y ) ≈ L as (x, y ) → (x0 , y0 ) (1)

along any path that stays within the domain of f .

Other Notations:

lim f (x, y ) = L
x→x0
and f (x, y ) → L as (x, y ) → (x0 , y0 ).
y →y0

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 8 / 66
 Example 5
Evaluate
x 2 + x − xy − y
x 2 + xy + y 2


a. lim b. lim
(x,y )→(0,0) (x,y )→(0,0) x −y

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 9 / 66
 Example 6
Find lim f (x, y ) if it exists, where
(x,y )→(0,0)

xy 2 3x 2 y
a. lim b. lim
(x,y )→(0,0) x 2 + y 4 (x,y )→(0,0) x 2 + y 2

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 10 / 66
 Definition 7 (Continuity)
A function f of two variables is called continuous at (x0 , y0 ) if

lim f (x, y ) = f (x0 , y0 ). (2)

(x,y )→(x0 ,y0 )

The function f is continuous on D if f is continuous at each point in D.

Example 8
Test the continuity of the functions
x −y 1
a. f (x, y ) = b. f (x, y ) =
x2 + y2 y − x2

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 11 / 66
 Example 9
Show that f is continuous at (0, 0) where
1

 y sin
 if x ̸= 0
f (x, y ) = x

0 if x = 0


Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 12 / 66
 Example 10
Show that f is continuous at (0, 0) where

3x 2 y

if (x, y ) ̸= (0, 0)


 2 2
f (x, y ) = x + y


0 if (x, y ) = (0, 0)


Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 13 / 66
 Example 11
Test the continuity of g at (0, 0)
 2
x − y2
if (x, y ) ̸= (0, 0)


 2 2
g (x, y ) = x + y


0 if (x, y ) = (0, 0)


Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 14 / 66
 2.3 Partial Derivatives

Definition 12 (Partial derivatives)

If z = f (x, y ) be a function of two variables, its partial derivatives are the
functions fx and fy defined by

f (x + h, y ) − f (x, y )
fx (x, y ) = lim , (3)
h→0 h
f (x, y + h) − f (x, y )
fy (x, y ) = lim . (4)
h→0 h

Notation for Partial derivatives

∂f
zx = fx (x, y ) = (x, y ) = Dx f ,
∂x
∂f
zy = fy (x, y ) = (x, y ) = Dy f .
∂y

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 15 / 66
 Rule for finding partial derivatives of z = f (x, y )
▶ To find fx , regard y as a constant and differentiate f (x, y ) with
respect to x.
▶ To find fy , regard x as a constant and differentiate f (x, y ) with
respect to y .

Example 13
If f (x, y ) = x 3 + x 2 y 2 − 2y 2 , find fx and fy .

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 16 / 66
 Example 14
∂z
Let z = x 2 sin 3x + y 3 . Evaluate


and zy (1, 1).
∂x ( π ,0)
3

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 17 / 66
 Example 15
Let f (x, y , z) = x 2 + 2xy 2 + yz 3 . Determine fx , fy and fz .

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 18 / 66
 Example 16
Show that the function z = ln x 2 + xy + y 2 satisfies the equation

xzx + yzy = 2.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 19 / 66
 Partial Derivative as a slope

Hình: Slope interpretation of partial derivative

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 20 / 66
 Example 17
Find the slope of the line that is parallel to the xz-plane and tangent to
√
the surface z = x x + y at the point P(1, 3, 2).

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 21 / 66
 Equation of the tangent plane
Suppose S is a surface with the equation z = f (x, y ) and let P0 (x0 , y0 , z0 )
be a point on S at which a tangent plane exists. Then an equation for the
tangent plane to S at P0 is

z − z0 = fx (x0 , y0 )(x − x0 ) + fy (x0 , y0 )(y − y0 ).

Hình: The tangent plane contains the tangent lines T1 and T2

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 22 / 66
 Partial Derivative as a Rate

Function of two variables z = f (x, y )

1 the rate of change of f with respect to x as y is held fixed

fx (x0 , y0 ) ≈ f (x0 + 1, y0 ) − f (x0 , y0 ). (5)

2 the rate of change of f with respect to y as x is held fixed

fy (x0 , y0 ) ≈ f (x0 , y0 + 1) − f (x0 , y0 ). (6)

In economic, the phrase

"rate of change" means "marginal".

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 23 / 66
 Example 18
A company manufactures two types of skis, the Lightning and the Alpine
models. Suppose the joint-cost function for producing x pairs of the
Lightning model and y pairs of the Alpine model per week is

c = f (x, y ) = 0.07x 2 + 75x + 85y + 6000

where c is expressed in dollars. Determine the marginal costs ∂x/∂x and

∂x/∂y when x = 100 and y = 50, and interpret the results.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 24 / 66
 Application
Competitive and Complementary Products

Assume that the demand functions of two products A and B are given by:

q1 = f (p1 , p2 ) demand function for A

q2 = g (p1 , p2 ) demand function for B

where p1 and p2 are prices of A and B respectively.

1 A and B are said to be competitive products or substitutes if
∂q1 ∂q2
>0 and > 0. (7)
∂p2 ∂p1
2 A and B are complementary products if
∂q1 ∂q2
<0 and < 0. (8)
∂p2 ∂p1

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 25 / 66
 Application
Partial elasticity

Let z = f (x, y ) be a differentiable function.

1 The point partial elasticity of z w.r.t x at (x0 , y0 ) is

x0 x0 ∆z
Ezx (x0 , y0 ) = · fx (x0 , y0 ) ≈ · (9)
f (x0 , y0 ) f (x0 , y0 ) ∆x
2 The point partial elasticity of z w.r.t y at (x0 , y0 ) is

y0 y0 ∆z
Ezy (x0 , y0 ) = · fy (x0 , y0 ) ≈ · (10)
f (x0 , y0 ) f (x0 , y0 ) ∆y

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 26 / 66
 High-order Partial Derivatives

Given a function of two variables z = f (x, y )

1 Second order partial derivatives

∂2f
 
∂ ∂f
= = (fx )x = fxx
∂x 2 ∂x ∂x
∂2f
 
∂ ∂f
= = (fy )y = fyy
∂y 2 ∂y ∂y
2 Mixed second order partial derivatives

∂2f
 
∂ ∂f
= = (fx )y = fxy
∂x∂y ∂y ∂x
∂2f
 
∂ ∂f
= = (fy )x = fyx
∂y ∂x ∂x ∂y

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 27 / 66
 Example 19
Find the second partial derivatives of f (x, y ) = x 3 + x 2 y 2 − 2y 2 .

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 28 / 66
 Theorem 20 (Clairaut’s Theorem)
Suppose f is defined on an open disk D that contains the point (x0 , y0 ). If
the functions fxy and fyx are both continuous on D, then

fxy (x0 , y0 ) = fyx (x0 , y0 )

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 29 / 66
 2.4 Total Differential
Definition 21 (Differential)
The differential of y at a

dy |x=a = f ′ (a)dx

For x near a, the linear approximation of f

at a

f (x) ≈ f (a) + f ′ (a)(x − a)

Let ∆x be the increment in x then the

increment approximation of y at a

∆y = f (a + ∆x) − f (a) ≈ f ′ (a)∆x

Hình: ∆y ≈ dy for ∆x = dx
small
Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 30 / 66
 Definition 22 (Total differential)
The differential of z = f (x, y ), also called total differential, is defined by

df = fx dx + fy dy (11)

and the differential of f at (a, b)

df |(a,b) = fx (a, b)dx + fy (a, b)dy (12)

The second order differential of f is

d 2 f = fxx dx 2 + 2fxy dxdy + fyy dy 2 (13)

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 31 / 66
 Approximation
For (x, y ) near (a, b), the linear approximation of f at (a, b) is
f (x, y ) ≈ f (a, b) + fx (a, b)(x − a) + fy (a, b)(y − b). (14)

Hình: ∆z ≈ dz for ∆x, ∆y small

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 32 / 66
 Application

Let ∆x, ∆y be the increments in x, y then the increment of f at (a, b)

∆f =f (a + ∆x, b + ∆y ) − f (a, b) ≈ fx (a, b)∆x + fy (a, b)∆y

If ∆x = dx and ∆y = dy are small, then

∆f ≈ df |(a,b) = fx (a, b)dx + fy (a, b)dy (15)

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 33 / 66
 Example 23
At a certain factory, the daily output is Q = 60K 1/2 L1/3 units, where K
denotes the capital investment (in units of $1,000) and L the size of the
labor force (in worker-hours). The current capital investment is $900,000
and 1,000 worker-hours of labor are used each day. Estimate the change in
output that will result if capital investment is increased by $1,000 and
labor is decreased by 2 worker-hours.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 34 / 66
 2.5 Chain Rules

Theorem 24 (The Chain Rule for One Parameter)

Suppose that z = f (x, y ) is a differentiable function of x and y , where
x = x(t) and y = y (t) are both differentiable functions of t. Then z is a
differentiable function of t and
dz ∂z dx ∂z dy
= + (16)
dt ∂x dt ∂y dt

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 35 / 66
 Example 25
Find the derivative of the following composite functions

(a) z = x 2 y + 3xy 4 , where x = cos t, y = sin 2t,

p
(b) z = x 1 + y 2 , where x = te 2t , y = e −t .

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 36 / 66
 Example 26
A manufacturer has modeled its yearly production function Q (the value of
its entire production in millions of dollars) as a Cobb-Douglas function

Q = f (L, K ) = 1.47L0.65 K 0.35

where L is the number of labor hours (in thousands) and K is the invested
capital (in millions of dollars). Suppose that when L = 30 and K = 8, the
labor force is decreasing at a rate of 2000 labor hours per year and capital
is increasing at a rate of $500,000 per year. Find the rate of change of
production.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 37 / 66
 Example 27
The voltage in a simple electrical circuit is slowly decreasing as the battery
wears out. The resistance is slowly increasing as the resistor heats up. Use
Ohm’s Law, V = IR, to find how the current I is changing at the moment
when R = 400 Ω, I = 0.08 A, dV /dt = −0.01 V/s, and dR/dt = 0.03 Ω/s.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 38 / 66
 Theorem 28 (The Chain Rule for Two Parameters)
Suppose that z = f (x, y ) is a differentiable function of x and y , where
x = x(u, v ) and y = y (u, v ) are both differentiable functions of u and v .
Then z is a differentiable function of u and v , and
∂z ∂z ∂x ∂z ∂y ∂z ∂z ∂x ∂z ∂y
= + and = + (17)
∂u ∂x ∂u ∂y ∂u ∂v ∂x ∂v ∂y ∂v

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 39 / 66
 Example 29
Suppose the cost c of producing qA units of product A and qB units of
product B is given by

c = (3qA2 + qB3 + 4)1/3

and the coupled demand functions for the products are given by

qA = 10 − pA + pB2 and qB = 20 + pA − 11pB

∂c ∂c
Use a chain rule to evaluate and when pA = 25 and pB = 4.
∂pA ∂pB

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 40 / 66
 Example 30
∂w 2 r +s
Find if w = 4x + y 2 + z 3 , where x = e rs , y = ln and z = rst 2 .
∂s t

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 41 / 66
 Example 31
If f is differentiable and z = u + f u 2 v 2 , show that

∂z ∂z
u −v = u.
∂u ∂v

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 42 / 66
 2.6 Extrema of Functions of Two Variables

Absolute extrema (Global extrema)

Relative extrema (Local extrema)

Hình: Absolute extrema and Relative extrema

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 43 / 66
 Theorem 32 (Partial derivative criteria for relative extrema)
If f has a relative maximum or minimum at (x0 , y0 ) and the first-order partial
derivatives of f exist there, then

fx (x0 , y0 ) = 0 and fy (x0 , y0 ) = 0.

Hình: Relative extrema

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 44 / 66
 Definition 33 (Critical points)
A point (x0 , y0 ) is called a critical point or stationary point of f if either
fx (x0 , y0 ) = fy (x0 , y0 ) = 0 or one of these partial derivatives does not exist.

Notice:
▶ If f has a relative maximum or minium at (x0 , y0 ), then (x0 , y0 ) is a
critical point.
▶ At the critical point, a function could have a relative maximum or
relative minimum or neither.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 45 / 66
 Jacobian and Hessian Matrices

Jacobian matrix of z = f (x, y ) denoted by J = Df

 
f
J= x (18)
fy

Hessian matrix of z = f (x, y ) denoted by H = D 2 f = ∇2 f

 
fxx fxy
H= (19)
fyx fyy

the second order total differential of z is

d 2 z = fxx (dx)2 + 2fxy dxdy + fyy (dy )2

  

fxx fxy dx
= dx dy
fyx fyy dy

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 46 / 66
 Extrema of functions of two variables
The Second Derivative Test

1 First-order conditions:
 
f
Jf = x = 0 or fx = fy = 0. (20)
fy

2 Second-order conditions:
(a) A maximum of z = f (x, y ) if d 2 z < 0 for any values of dx and dy ,
not both zero. The Hessian matrix H is negative definite,

M1 < 0 and M2 > 0.

(b) A minimum of z = f (x, y ) if d 2 z > 0 for any values of dx and dy , not

both zero. The Hessian matrix H is positive definite

M1 > 0 and M2 > 0.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 47 / 66
 Theorem 34 (Second Derivatives Test)
Suppose that (x0 , y0 ) is a critical point of f (x, y ) and f has continuous
second-order partial derivatives in a disk with center (x0 , y0 ). The discrimi-
nant of f is the expression

D = fxx fyy − fxy2 (21)

1 If D(x0 , y0 ) > 0 and fxx (x0 , y0 ) > 0, then f has a relative minimum
at (x0 , y0 );
2 If D(x0 , y0 ) > 0 and fxx (x0 , y0 ) < 0, then f has a relative maximum
at (x0 , y0 );
3 If D(x0 , y0 ) < 0, then f has a saddle point at (x0 , y0 );
4 If D(x0 , y0 ) = 0, then no conclusion about an extremum at (x0 , y0 )
can be drawn, and further analysis is required.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 48 / 66
 Example 35
Find all relative extrema and saddle points of the function

f (x, y ) = y 2 − x 2 .

Hình: Saddle point

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 49 / 66
 Example 36
Find all relative extrema and saddle points of the function

f (x, y ) = 2x 2 + 2xy + y 2 − 2x − 2y + 5.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 50 / 66
 Example 37
Find all relative extrema and saddle points of the function

f (x, y ) = x 4 + y 4 − 4xy + 1.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 51 / 66
 Example 38
Find all relative extrema and saddle points of the function

f (x, y ) = x 2 y 4 .

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 52 / 66
 Profit Maximization for Multi-products
Pure Market

1 The firm’s revenue function of a two-product firm is

R = P1 Q1 + P2 Q2

where Pi and Qi respectively represent the prices and the outputs of

the ith product.
2 The firm’s cost function is assumed to be

C = 2Q12 + Q1 Q2 + 2Q22 .

3 Find the levels of Q1 and Q2 to maximize the profit π for P1 = 100

and P2 = 200?

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 53 / 66
 Profit Maximization for Multi-products
Monopolistic Market

1 The firm’s revenue function is

R = P1 Q1 + P2 Q2 .
But now the prices of two commodities will now vary with their
output levels which can be found in the demand functions for firm’s
two products, for example:
Q1 = 40 − 2P1 + P2
Q2 = 15 + P1 − P2
2 The firm’s cost function is assumed to be
C = Q12 + Q1 Q2 + Q22 .
3 Find the levels of outputs (Q1 , Q2 ) to maximize the profit
π = π(Q1 , Q2 )? And then implying the optimal prices (P1 , P2 )
Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 54 / 66
 Profit Maximization: Input Decisions of a Firm

Consider a competitive firm with the profit function π given by

π = R − C = PQ − WL − RK

where P is price, Q is the output, L is labor, K is capital, W is the nomial

wage and R is the rental cost of capital.
Since the firm operates in a competitive market, we have that:
the exogenous variables are P, W and R.
the endogenous variables are Q, L and K . However, the output is in
turn a function of L and K , let assume it to be the Cobb-Douglas
production function

Q = Q(L, K ) = L1/2 K 1/3 .

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 55 / 66
 Example 39
Find (L, K ) to maximize the profit function π given by

π(L, K ) = PL1/2 K 1/3 − WL − RK .

where P, W and R are parameters. Solve the problem for P = 3, Q = 1

and R = 0.02?

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 56 / 66
 Extrema of z = f (x1 , x2 , ..., xn )
1 The first-order conditions, the Jacobian matrix of f yields
 
fx1
fx 
 2
Jf =  .  = 0. (22)
 .. 
fxn
2 The second-order conditions, the Hessian matrix of f
 
fx1 x1 fx1 x2 · · · fx1 xn
fx x fx x · · · fx x 
 2 1 2 2 2 n
H= . .. ..  (23)
 . . . . 
fxn x1 fxn x2 · · · fxn xn

is negative definite for a local maximum: M1 < 0, M2 > 0, ...,

(−1)n Mn > 0.
is positive definite for a local minimum: M1 > 0, M2 > 0, ..., Mn > 0.
Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 57 / 66
 2.7 Lagrange Multipliers

To find the maximum and minimum values of the function

z = f (x, y ) subjected to the constraint g (x, y ) = k. (24)

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 58 / 66
 Method of Lagrange Multipliers

Let us consider the Lagrangian function

L (λ, x, y ) = f (x, y ) + λ(k − g (x, y )), (25)

Find λ, x and y to optimize the Lagrangian function L(λ, y , x).

Step1. Using the first-order conditions we have that

Lλ = k − g (x, y ) = 0
Lx = fx (x, y ) − λgx (x, y ) = 0
Ly = fy (x, y ) − λgy (x, y ) = 0

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 59 / 66
Step2. Using the second-order conditions, the leading principle minors of
the bordered Hessian matrix of order (n + 1) × (n + 1) of L (λ, x, y )
 
Lλλ Lλx Lλy
H(λ, x, y ) = Lxλ Lxx Lxy  (26)
Ly λ Lyx Lyy

+ If detH > 0 then f has a local maximum;

+ If detH < 0 then f has a local minimum.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 60 / 66
 Example 40
(1) Find the maximum and minimum values of the function z = xy with
constraint x + y = 1.
(2) Find the maximum and minimum values of the function z = x + y with
constraint x 2 + y 2 = 1.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 61 / 66
 Example 41
Suppose a firm has an order for 200 units of its product and wishes to
distribute its manufacture between two of its plants, plant 1 and plant 2.
Let q1 and q2 denote the outputs of plants 1 and 2, respectively, and
suppose the total-cost function is given by

c = f (q1 , q2 ) = 2q12 + q1 q2 + q22 + 200.

How should the output be distributed in order to minimize costs?

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 62 / 66
 Example 42 (Cost Minimization)
Suppose a firm wishes to minimize cost C given by

C = WL + RK

subject to the constrain that Q0 = 2500 units are produced, where the
product function Q is given by

Q = F (L, K ) = 0.5L0.2 K 0.7 (units).

Find L, K to minimize the cost C when W = 400 and R = 0.01?

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 63 / 66
 Example 43 (Utility Maximization)
Consider a household with a utility function:

U(x, y ) = ln x + ln y ,

where x and y are the quantity of two commodities. A consumer spend an

income F to purchase two commodities x and y with prices px and py per
unit, respectively. Find x and y to maximize the utility with F = 12,
px = 5 and py = 4.

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 64 / 66
 Constrained Optimization
Find x = (x1 , x2 , .., xn ) to maximize or minimize the objective function:

y = f (x) subject to the constraint h(x) = 0.

Let us consider the Lagrangian function

L (λ, x) = f (x) + λh(x), (27)

Find λ and x to optimize the Lagrangian function L(λ, x)?

Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 65 / 66
 Method of Solution

Using the first-order conditions we have that

Lλ = h(x) = 0
Lxi = fxi (x) + λhxi (x) = 0, i = 1, 2, ..., n

Using the second-order conditions, the leading principle minors of

the bordered Hessian matrix of order (n + 1) × (n + 1) of L (λ, x)
 
Lλλ Lλx1 · · · Lλxn
Lx λ Lx x · · · Lx x 
 1 1 1 1 n
H(λ, x) =  . .. .. 
 .. . . 
Lxn λ Lxn x1 · · · Lxn xn

+ M3 > 0, M4 < 0, ..., (−1)n−1 Mn > 0: for a local maximum;

+ M3 < 0, M4 < 0, ..., Mn < 0: for a local minimum.
Assoc. Prof. Dinh Nguyen Duy Hai (HUB) Chapter 2. Functions of Several Variables 66 / 66