Consider the following function of two choice variables Z = f (x,y) Write down the first order and the second order conditions for a minimum.
economics
Description
1.(i) Consider the following function of two choice variables
Z = f (x,y)
Write down the first order and the second order conditions for a minimum.
(ii) Suppose an individual’s health status Z (measured on a scale of 0 to 10) is a function
of two health enhancing drugs x and y (measured as daily dosages) as follows
Z = - x 2 + 2x - y 2 + 4y+ 5
(a) Find fx, fy, fxy, fyx, fxx, fyy
(b) Show that the function has only one stationary point at x = 1 and y = 2 and it is a maximum.
(c) Estimate the value of the health status Z at the point derived at (b)
2. The marginal cost (MC) for producing a certain article in $ is given by
where q is the quantity of production. Determine constant A, B, C such that
And hence evaluate the total weekly variable costs involved in producing
(i) 10 items per week
(ii) 100 items per week
