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Advanced Math PS12

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17 views1 page

Advanced Math PS12

Uploaded by

wenwen.jin1999
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Advanced Mathematics (WS21) Prof.

Christoph Vanberg

Problem Set 12
(Optimization Part 2)
(1) Consider the problem
max x1 x2
(x1 ,x2 )
s.t. x1 + ax2 = 1
where a > 0 is a parameter.

(a) Show what the CQ holds at any solution x∗ , and conclude that a necessary condition
for x∗ to solve this problem is that there exists µ ∈ R such that ∇F (x∗ ) = µ∇h(x∗ ).

(b) Consider the equivalent problem of maximizing F on the ‘slice’ defined by the con-
straint set
C = {x ∈ Rn : x = x∗ + tvf ort ∈ R}
where v is a vector that points along the constraint set. What do such vectors look
like? Show that a necessary condition for x∗ to be a maximizer on this ‘slice’ is
DF (x∗ )v = 0.

(c) Show that the two first order conditions are equivalent, and solve for a candidate
solution.

(d) Check whether the second order sufficient condition is satisfied, using the approach
on slide 23 of the lecture.

(2) Consider the standard utility maximization problem

max u(x1 , x2 )
x1 ,x2
s.t. p1 x1 + p2 x2 = y

Let v(p1 , p2 , y) denote the maximized value for given parameters (p1 , p2 , y). Derive an in-
∂v
terpretable expression for ∂p i
. Explain how your findings relate it to the Envelope Theorem
and the meaning of the Lagrange multiplier. (Hint: As part of your derivation, you must
differentiate the constraint with respect to pi .)

(3) Check the second order sufficient conditions for problems 18.5 and 18.11. (For the
latter, you will have to independently study Theorem 19.8)

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