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    Tutorial 1

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    This document contains 5 questions regarding advanced mathematics concepts for economists. It provides instructions for submitting answers by January 30th and poses the following questions: 1) Find the extreme values and characterize them as maximum or minimum for two functions between given intervals. 2) Find the quantity that maximizes profit for a given profit function between an interval. 3) Use the implicit function theorem and solve explicitly to find indifference curves and slopes for a given utility function, and verify utilities for two consumption bundles. 4) Find the quantities of two goods that maximize utility for a consumer with a square root utility function, income constraint, and prices. Consider assumptions made for the budget constraint. 5) Find the consumption

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    Tutorial 1

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    23 views3 pages
    This document contains 5 questions regarding advanced mathematics concepts for economists. It provides instructions for submitting answers by January 30th and poses the following questions: 1) Find the extreme values and characterize them as maximum or minimum for two functions between given intervals. 2) Find the quantity that maximizes profit for a given profit function between an interval. 3) Use the implicit function theorem and solve explicitly to find indifference curves and slopes for a given utility function, and verify utilities for two consumption bundles. 4) Find the quantities of two goods that maximize utility for a consumer with a square root utility function, income constraint, and prices. Consider assumptions made for the budget constraint. 5) Find the consumption

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    This document contains 5 questions regarding advanced mathematics concepts for economists. It provides instructions for submitting answers by January 30th and poses the following questions: 1) Find the extreme values and characterize them as maximum or minimum for two functions between given intervals. 2) Find the quantity that maximizes profit for a given profit function between an interval. 3) Use the implicit function theorem and solve explicitly to find indifference curves and slopes for a given utility function, and verify utilities for two consumption bundles. 4) Find the quantities of two goods that maximize utility for a consumer with a square root utility function, income constraint, and prices. Consider assumptions made for the budget constraint. 5) Find the consumption

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    23 views3 pages

    Tutorial 1

    Uploaded by

    kings account
    This document contains 5 questions regarding advanced mathematics concepts for economists. It provides instructions for submitting answers by January 30th and poses the following questions: 1) Find the extreme values and characterize them as maximum or minimum for two functions between given intervals. 2) Find the quantity that maximizes profit for a given profit function between an interval. 3) Use the implicit function theorem and solve explicitly to find indifference curves and slopes for a given utility function, and verify utilities for two consumption bundles. 4) Find the quantities of two goods that maximize utility for a consumer with a square root utility function, income constraint, and prices. Consider assumptions made for the budget constraint. 5) Find the consumption

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    4SSMN903: Advanced Mathematics for

    Economists
    Tutorial 1

    January, 2022

    Answers should be submitted online before 30th January.

    1 Question 1
    Find the extreme values of the following functions and characterize them if they
    are maximum or minimum.
    1 4
    1. f (x) = 12 x + 13 x3 − 7.5x2 , 2 ≤ x ≤ 10
    2. f (x) = 43 x4 + x3 − 9x2 + 2, , − 4 ≤ x ≤ 1

    2 Question 2
    The profit function of a firm is

    Π = q 4 + 2q 3 + 2

    where q takes values in the interval 1 ≤ q ≤ 1.2. Find the quantity q that
    maximizes profit.

    3 Question 3
    . Assume a utility function of the form

    U (x, y) = 5lnx + 20lny

    where x > 0 and y > 0.

    1. Find the slope of the indifference curve that gives 20 units of utility, using
    the Implicit Function Theorem.

    1
    2. Solve for the indifference curve explicitly (i.e. solve for y as a function of
    x), and find the slope of the indifference curve. Show that the slope is the
    same as that in (a).
    3. A consumer with the above utility function, U (x, y), could choose between
    two consumption bundles, a) x = 20, y = 1.285 and b) x = 1, y = 2.718,
    verify that they gives (approximately) the same utility. If the consumer
    can combine a) and b) with quantity consumed being half of each in bundle
    a) and b), i.e. x = 21 20+ 12 1, y = 21 1.285+ 12 2.718, does this bundle c) gives
    higher utility than consuming a) or b)? Comment if this is a reasonable
    assumption on how consumer may choose in some context.

    4 Question 4
    A consumer has utility function
    √ √
    U (x1 , x2 ) = x1 + 3 x2

    Price of good 1 (p1 ) is 2, and price of good 2 (p2 ), is 1. The income of the
    consumer is 25. Find the quantities of the two goods that maximize utility of
    the consumer. (Hint: The budget constraints is p1 x1 + p2 x2 = M ) Would the
    consumer spend zero on one of the two goods? Why and why not?
    What are the assumptions we made about the consumer in writing the bud-
    get constraint as p1 x1 + p2 x2 = M ? Suggest two economic assumptions implicit
    in it and comment if they may or may not be reasonable assumptions.

    5 Question 5
    Consider an agent who maximize intertemporal, two-periods utility from good
    x where the price of the good equals to 1 in both periods. Denote x1 the
    consumption of good x in period 1 and x2 the consumption of good x in period
    2.
    The agent receives 20 units of income in period 1, and no income in period 2
    (e.g. retirement period). Thus, to consume in period 2 she has to save some of
    the income from period 1. Savings from period 1 is obtained in period 2 together
    with an interest rate, r = 0.08 (how the market evaluates the future relative to
    x2
    the present). The present value budget constraint is given by x1 + 1.08 = 20.
    The intertemporal utility function is given by

    U (x1 , x2 ) = ln(x1 ) + βln(x2 )

    where β = 0.04 is the subjective discount rate (how much the agent value future
    relative to present).
    Find the consumption of good x in period 1, x1 , and 2, x2 , that maximizes
    intertemporal utility.

    2
    Does the consumer consume more in period 1 or period 2? What may affect
    the decision?
    The model assumes there is no uncertainty in the economic environment. If
    we apply the model to analyse consumption decision for retirement, discuss if
    it is a reasonable assumption.

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