Ms. Nikita Singh, Dr. Rakesh Kumar Singh, Ms.

Sneha Bhardwaj
Intermediate Mathematical Methods for Economics
Functions of Many Variables
Question 1. The demand D1 for potatoes in the USA, for the period 1927 to 1941, was estimated to be
D1 = Ap0.28 m0.34 , where p is the price of potatoes and m is mean income.
The demand for apples was estimated to be D2 = Bq 1.27 m1.32 , where q is the price of apples.
Find the price elasticities of demand, Elp D1 and Elq D2 , as well as the income elasticities of demand Elm D1
and Elm D2 , and comment on their signs.

Question 2. Find if the following function is homothetic

2(xy)2
(xy)2 + 1

Question 3. A firm produces Q = f(L) units of a commodity using L units of labour. We assume that
f’(L)>0 and f”(L)<0, so f is strictly increasing and strictly concave.
(a) If the firm gets P per unit produced and pays w for a unit of labour, write down the profit function,
and find the first-order condition for profit maximization at L* > 0.
(b) By implicit differentiation of the first-order condition, examine how changes in P and w influence the
optimal choice of L*.

Question 4. Calculate the elasticity of substitution between y and x for F(x, y) = 10x2 + 15y 2 .

Question 5. Check the properties of Euler’s theorem for the function f (x, y) = 3x2 y − y 3