EC140 Mathematical Techniques B

Autumn Term 2023

Pre-Class Problem set 2

Problems
(Numbers in parentheses refer to the relevant sections in the textbook.)

Multivariate Calculus

1. (11.2)

(a) Find the first partial derivative of F (x, y) = 3x2 y 3x 4y with

respect to y.
(b) If x(v1 , v2 ) = (v1p + v2q )r , find x01 (v1 , v2 ).
(c) If F (x, y) = x2 y + 3xy 3 4, find F20 (x, y).
0
(d) If Y (K, L, M ) = ↵K a + Lb + M c , find YM .

2. (11.3)
Show that the points (x, y) = (e, 0) and (x, y) = (2, 7) are on the same
level curve for the function f (x, y) = ln(x3 y) + 3(x 1)y + 17 y(x + 1).
3. For which points (a, b) is F (a, b) = e4a b ln(ab2 ) defined? Show that
(a, b) = ( 14 , 2) lies on the level curve F (a, b) = 1e .
4. Let f be a function of two variables given by:

f (x, y) = (2x 3y 2 )2 + 4xy

Calculate all first and second order partial derivatives of f

5. (11.2)
(a) A function f of two variables is given by

f (x, y) = 5x2 2xy + 2y 2 4x 10y + 5

for all x and y. Find all first and second order partial derivatives of
f.
(b) Find the only point at which both first-order derivatives equal zero.

6. Consider a di↵erentiable function g with k arguments, g(x1 , ..., xk ). When

you compute the Hessian matrix corresponding to that function, how many
elements of that matrix do you need to compute independently when k =
12? Briefly explain your answer.

1
Elasticity
1. Find the price elasticity of demand for the following demand function:
3
D(p) = 20Bp 2

where B > 0.
2. Find the partial elasticities with respect to (w.r.t.) x and y of the following
function (assuming x > 0 and y > 0):
z = 3(x + 1)3 (y + 1)2

Multivariate Optimisation
1. (13.4)

(a) Compute the partial derivatives of the first and second order of
f (x, y) = x3 + 2xy 5x y 2 .
(b) Find the stationary points and classify them.

2. (13.3)

(a) Find the stationary points of f (x, y) = 3xy 2xy 2 x2 y.

(b) Classify them.

3. (13.2 and 13.7)

A firm has the production function Q = F (K, L) = K 1/2 L1/4 for K > 0
and L > 0 and chooses its inputs K of capital and L of labour in order to
maximize profits ⇡ = P Q rK wL, where P > 0, r > 0 and w > 0.

(a) Suppose we scale all inputs by a constant t, F (tK, tL). Find the x
that satisfies F (tK, tL) = tx F (K, L).
(b) Show that ⇡ is concave.
(c) Write the first-order conditions for the profit maximization problem.
(d) Show that rK = 12 P Q and wL = 14 P Q at the maximum.
(e) Using the result in (d), find the firm’s optimal output Q⇤ (P, r, w),
and so also the firm’s input demands as functions K ⇤ (P, r, w) and
L⇤ (P, r, w).
(f) Find the firm’s maximum profits ⇡ ⇤ (P, r, w).
(g) Use the answers to (e) and (f) in order to verify that the first-order
⇤
⇤ @⇡ ⇤
partial derivatives of ⇡ ⇤ (P, r, w) satisfy @⇡
@P = Q , @r = K ⇤ , and
⇤
@⇡
@w = L⇤ . Give an economic interpretation of these three equali-
ties.