Mathematics for IBA

Valentijn Stienen
v.f.stienen@uvt. nI
K 653

Lectu re 7
Today
Theory: Chapter 3: sections 3.1, 3.2,3.3 and 3.4.L

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Take home exercise
Exercise 1

A production function is described by P(L) : L4 (r>0)

Gf'
Determine the marginal p rod uction fu nction. (Resit 20L2-2013)
0' (Lr LL+z
P(L1 '' u{L) ' !r(Lr w[L] t- L nfrrn
|l

)
rr (Lt r tit
. {Fr (t- t
a
:
PttUt r^'(t)
.v(Lr { n(r-) " P fu ct4,tLF f r^/o

. w'(Ll = 1L3 q (t-t) '

q(L)
a
L + 2 w, (tr
. ,rf (Lt a
t 4r(*,1 = (i ) ,
-

il Lt+ 2
vt(Ll= (h" +a
a h 3\ (
e o
2L CQ.'. dlrtr,"rin

t(t-t *t q
:pl f I

'fL? (
9_
J )" + L G)t'*",lnrit'LL
r
,lL g !t+{'
zLr
, I Lt+
(5 ) J.l (*)
L

G) +

3/L6
Exercise 2 inf( tsr
a) Determine, if possible, the inverse of the function O**\
(l aaso o(:9in{
a@)
6
+ 5, (* + 3). u4 1d
r 3 (vngc

b) Determine the derivative of the inverse function of

v r) fr
l)
lr
n U:2
al 5. ro. .3
,(- 3 rS t (:) x .. -

e) 6
EJ I
!(-3
u
;f=D
l-J (/-.3)(S-s) -- ( i[ g"5
ft lr (>J *,
( (y{s)
g-t ftr -3 5-r
(
?J/ 3 3+ V-c (
U /
s )

\ x (bt - 3+F6 ("u a'

4/L6
tl l1c*tu,* L J..:iltrc. G I *t* &o *
5

DJ/'tt^^i't
ftdl".rc 4' , 6cal KI (rt = . --
I
ab
-
v /x l
t r.luert { ? ,<(L)
-t
I

q
lcg
-
o
U'(*t G sx +r
a x (tt t
t g(<(-l) 1 ,-. gtl) = L
S(x(zt) = z
f.-f^\-t
ktg Qs"t g lvJw+r.
?
a
i
T
I
I l.
t
(r.r --
J. (ll
+-
>) * - tl -
6-I +1 .<
Functions of two variables
Definition A function of the variables r and y is a prescription z @), which
calculates for any combination of r and A a num ber, the function value.
All feasible values D1 of r and D2 of A tog ether form the domain of the function.
The set of all possible function values is the range o f the function.

An& QtAtqvt-

Flu-nrliJ'
A- ticn OhL<: v(- r 6(tt
-
2' v ir to4tet (rb +({n z
F *attit\ -l

5/L6
Example (function of two variables)
Consider the function z(r,A) : tr2 + A2.
(i) Determine z(L,2), z(2,,L) and z(I,L)
(ii) Graph of this function?
t; ?I Lrl > D" Jh I h '- *r7 C.t1 tc4il ry tda^1.
,

*(Lr, t r 2'+,' ? S Qange t +€ [o, -) (r'2o,?.7o)

7 ( lrtt ? tLJ Ja= e- *2.o 4 xt-t U, 2. o
(,L t, Nt tvc-/- L 3 a.<-l g

I
z (J-' tnr y',c'cvl 4115, I

to LrP).
a h
Gr Nli..c'

$
6/L6
 I

l--
? I

/l
20
I

I
-:--
I

I
I

/l
15
| ,'
l./
10 I

(
5 5

0
0
5-5 s
a 6,0) F o
(ot+ o\- o \

7 /L6
Elementary functions of two variables
Constant function ( r vatiott W)
,(*,A) ,4(*t -- c
General: - c.
a
C
Example: z(r,A) - 3.
G ra ph: t'?) 't! aln 5l c- I
v) '? (zt
Le ,-gad"w\

z(r, a) 3

\- hoir.^rft+^,?l-t? '

I
- a
-to-
r

B/L6
Linear function
General: z(r,,A) - e,n * bA t c. ry t rA
o
a d--*+b
*PAb
o
rl

H'.5}*tt AO$L[
*rn "J tit ,-
Example: z(r, a) wvl
Gra ph:

, =.O z(*,A)--3r-2y+3
7tt '2 -1<t ) reo
+p =1,
l.t.r e t€+3
a ??-7'?*3
r a

leo
I

O s -3('% 'f- 3
$,r 3*+ 1.9=J
e/L6
 Q*ou4r aaf,t
ktt'r r
\trf trt
\rlu'rr
Quadratic function
General: z(r,A) +!ru+-g'+
an 2 * -
+ ''r' orlatte or tsrrt''
- 4r eU f .

Examples: z(r,,A) : 12 a2, z@,a)- -r2 *3ry - ?a2 + 4r - 8g * 10.

n t{llb,rti'61t tgn

L rloc CYt - + tg +c
U ^x\ t i
c,frQ
r( ef'S Sac^
cr*\Q#
U fo Ar ^'f $/A r.l C fur(^

L0/16
 g.*P>rren Et t1 * efld\ 5 ir.,tvr uQ eo !
Cobb-Doug las functio
l^?
Genera l: k*tAL -o, where k> 0,0<-c.<-1. rP ''
( r bon

Sometimes also functions of the form kroy7, where k

I > 0,,a > 0, P > 0 are referred
to as Cobb-Douglas functions. '

Cobb-Douglas functions are often used in economics.

Example: Q(L,K)-2LZ(I ,(L,,K >0) . ("t - 3\
.r) L - L
\ L a.nr\@i.
t olbor
Qfot+*€tsn
! t
l
,l-- rdi
*t t(
O(1$t61 -- 2 l6t. 1( 2. = 3a

LL/L6
Minimum function A( ,rl a<3 L;,"
C
General: z(r,A) - min{o*,bA}, where o ) 0, b > 0.
2 (*rgy t. b i, \5 < ^r(.
Example: z(n, A) - min {2*, A}.

* , #d Lottt c,t ( y\)^ oe+- l{t L g lc'll(t r.iO'r ho Gtc 1

u : #4 ?9^oerr
Z : *gl fropt< r^ell'. Jnh gl*Sr

{e o, E aJ =) 7 (o, t7 3 oi\" lL-ot i-I = o

x?L, Va! 4 * (t,, I Oni\n {t.r, ,I I
x. ( l,t) n^h { ?. , tI !
z
U = 1- '-l
{-o I ,
t

? ( lr3l t nnl'r { z-t, sY 'B 2 a

B-- 3
(a-( --)
,

L2/L6
Level curves
Definition lf z(*,a) is a function of two variables r and A, then the curve in an
(*.,y)-coordindteTstem with points such that the r- and A- coordinate satisfy the
eq uatron
7( r k
is called the
a)
lrrrl ,rrr: with a (function) value equal to k. ?f,5"'f^
A S5'o,
6n Anc.
*,Yl t
Example (level curve)
Consider the fu nction z(r, a)
with values 0 and 1.
2=o.. -3(-q_y+3 =o
rar 3( *LV 3 7

Z -z! -3x - L U +3 = L
e 3X +l-g 2 I

a 7
x
2=5
BO
L3/L6
L=I
 L
€4. a( *,X1 / +hc1- t =sl
v Z.=- 2 ) <" pj' 2

\
 {tt 5'rt'}1 :4'A @thh\n 6t$On
$
Remarks: go Lr^ !'a1vrc t u^'tu!'
,},
,L

fu nction: ind ifFerence cu rves.

nts.

L4/L6
Example (level curve: Cobb-Douglas)
Consider the production function QQ,K) :2LlNi, (L, K > 0).
(i) Determine the isoquant of QQ, K) at production level k.
(ii) Draw the isoqrffilitr' values k:2 and k:4.
D. 6o"rt K(L) = ---- t^,,itl. pradar*Av,r lrn<-l /L.
gt
q
t, 2 L" k
I
I A
eJ k 2L I
qd
r !!. tl.

(n') 3
,F
).

r{ l,l
q
4, ,L
r>1 )r. +-

k 1
a'.(L+ f tGL 3
(zr t
f
hq
4 K(t-l = (f L5/L6
 L\ t{
Lu) )b--- 2. ; l< C t, ) L i I
(' .L3 vK t3 L3
r z ql'trt
v I(
L=q; l<4) 7
t6
I
=
t6
--- Lt / t-" L
3

t
I
)p,+
,
=2
t2 L
 Applications
Utility functions and indifference curves
Suppose a consumer has utility function U(*,A). lf for two bundles (*r,At) and
(*r,Az) it holds that U(*rtUt) > U(*r,,Az), then this consumer prefers the bundle
(q,Yt) over (*r,ar) te .rrtlf n5.
b,t..oLttn
{ r- Ut^l SOlll'c-
lnterpretation level curve of a utility function? CaswLe

Example fi;Jlcn,'-
The preferences of a consumer with respect to the goods r and A can be described by
u (*, a) - min {2*, A}. Determ ine a nd d raw the ind ifFerence cu rve with [/-va lue 10.
Frlrat (Ar\ 6ir. Outl.c,rr:rS OJ Y n"brt fcJ.rl.s'^ tl- ,D
@4 t b
2x \l 2x< &
mnlrx.r g\ tx> u
d s ;0 t
t
1K= lO anA L*- < =) x=f a.adx l,O S g E
L,t =1o
g lO 0rr^ 9J. >A, 2)
= rJ Ano\ 2-X i- (o
e:d b
{-ato anot x2/ S A
L6/L6
tA
d
B
g[. a \o
tt A