Calculus II for

Business and
Economics
By Daria Vyachkileva
Multivariate Optimization

Extrema and saddle points.

In this section:

2
Multivariate Optimization

Function 𝑓 𝑥, 𝑦 in two variables Function 𝑔 𝑥 in one variable

𝑎, 𝑏 such that
Critical Point 𝜕𝑓 𝜕𝑓 𝑎 such that 𝑔′ 𝑎 = 0
𝑎, 𝑏 = 0 and 𝜕𝑦 = 0
𝜕𝑥

𝑓 has a relative max. at 𝑎, 𝑏 if 𝑔 𝑥 has a relative max. at 𝑎 if

Relative Maximum 𝑓 𝑎, 𝑏 ≥ 𝑓 𝑥, 𝑦 for all 𝑥, 𝑦 𝑔 𝑎 ≥ 𝑔 𝑥 for all 𝑥 sufficiently
sufficiently close to 𝑎, 𝑏 close to 𝑎

as above but as above but

Relative Minimum
𝑓 𝑎, 𝑏 ≤ 𝑓 𝑥, 𝑦 𝑔 𝑎 ≤𝑔 𝑥

𝑎, 𝑏 is a critical point but not a

Saddle Point relative max and not a relative -
min

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Multivariate Optimization

Function 𝑓 𝑥, 𝑦 in two variables Function 𝑔 𝑥 in one variable

𝑓 has an absolute max at 𝑎, 𝑏 if 𝑔 𝑥 has an absolute max. at 𝑎 if

Absolute Maximum 𝑓 𝑎, 𝑏 ≥ 𝑓 𝑥, 𝑦 for all 𝑥, 𝑦 in the 𝑔 𝑎 ≥ 𝑔 𝑥 for all 𝑥 in the domain
domain of 𝑓 of 𝑔

as above but as above but

Absolute Minimum
𝑓 𝑎, 𝑏 ≤ 𝑓 𝑥, 𝑦 𝑔 𝑎 ≤𝑔 𝑥

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Multivariate Optimization

Classification:

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Determining Relative Extrema

1. Find all critical points 𝑎, 𝑏 by

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Determining Relative Extrema

2. The second derivative test: Let

2
𝐷 𝑥, 𝑦 = 𝑓𝑥𝑥 𝑓𝑦𝑦 − 𝑓𝑥𝑦

from i
For each
point relative
Exx (a b)
to t max
) D(a b) > 0 and .

, at(a b),

min

2) D(a b) ,
> o and fxx (a b) .
to relative
at (a ,
b)

3) D(a b) ,
< 0 = Saddle point
test inconclusive of
is any
4) D(a b) 0 = ,
=
,

1 ,
2 ,
or 3 can occur

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Determining Relative Extrema

2. The second derivative test cont.

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Determining Relative Extrema

Example. Find the relative extrema of the function:

𝑓 𝑥, 𝑦 = 3𝑦 2 − 2𝑦 3 − 3𝑥 2 + 6𝑥𝑦

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Determining Relative Extrema

Example cont.

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Determining Relative Extrema

Example cont.

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Determining Relative Extrema

Example cont.

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Determining Relative Extrema

Example. Find the relative extrema of the function:

𝑓 𝑥, 𝑦 = 𝑥 4 + 𝑦 4 − 4𝑥𝑦.

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Determining Relative Extrema

Example cont.

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Determining Relative Extrema

Example cont.

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Determining Relative Extrema

Example cont.

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Determining Relative Extrema

Example cont.

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Finding absolute extrema

1. If domain is unbounded, check:

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Finding absolute extrema

2.

3.

4.

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Finding absolute extrema

Example. Find absolute extrema of 𝑓 𝑥, 𝑦 = 𝑥 4 + 𝑦 4 − 4𝑥𝑦

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Finding absolute extrema

Example cont.

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Finding absolute extrema

Application. We consider a company selling two types of products. Their unit prices 𝑝 and 𝑞 and demanded quantities
𝑥 and 𝑦 are related by
𝑥 = 𝑓 𝑝, 𝑞 = 10 − 2𝑝 + 𝑞
𝑦 = 𝑔 𝑝, 𝑞 = 20 + 𝑝 − 3𝑞

At which unit prices 𝑝 and 𝑞 are the revenues maximized?

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Finding absolute extrema

Application cont.

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Finding absolute extrema

Application cont.

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Finding absolute extrema

Application cont.

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Finding absolute extrema

Application cont.

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Constrained extrema

Motivation: often we want to find maximum subject to a condition.

We solve such problems with the method of Lagrange multipliers

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Constrained extrema

Method of Lagrange multipliers:

Find all 𝑥, 𝑦, 𝜆 with

∇𝑓 𝑥, 𝑦 = 𝜆∇𝑔 𝑥, 𝑦 , with 𝑔 𝑥, 𝑦 = 0

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Constrained extrema

Remark:

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Constrained extrema

True or False?

The Lagrange multipliers method always gives us the absolute minimum or absolute maximum of out function 𝑓.

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Constrained extrema

Source: iFunny

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Constrained extrema

Example. Find extrema of 𝑓 𝑥, 𝑦 = 2𝑥 + 2𝑦 − 𝑥 2 − 𝑦 2 under the constrain that 𝑥 2 + 𝑦 2 = 4

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Constrained extrema

Example cont.

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Constrained extrema

Example cont.

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Constrained extrema

Example cont.

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Constrained extrema

Application. A company can produce maximal 230 units per week of two products. Denoting the units of the two
products by 𝑥 and 𝑦, the profit function is
1 3 1
𝑃 𝑥, 𝑦 = − 𝑥 2 − 𝑦 2 − 𝑥𝑦 + 120𝑥 + 100𝑦 − 5000.
4 8 4

How many units of each of the two types should be produced to maximize the profit?

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Constrained extrema

Application cont.

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Constrained extrema

Application cont.

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Constrained extrema

Application cont.

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Constrained extrema

Application cont.

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Constrained extrema

Application cont.

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Constrained extrema

Application cont.

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Total differential

Recall that for a function in one variable 𝑦 = 𝑓 𝑥 , the differential 𝑑𝑦 is given by

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Total differential

Now:

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Total differential

Application. The company with two products and the profit function
1 3 1
𝑅 𝑥, 𝑦 = − 𝑥 2 − 𝑦 2 − 𝑥𝑦 + 120𝑥 + 100𝑦 − 500
4 8 4
Assume that the current production of 𝑥 = 180 and 𝑦 = 50 is reduced by 4 for the first type and increased by 2 for the
second type.

a. Determine the actual change in profit

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Total differential

Application.
1 3 1
𝑅 𝑥, 𝑦 = − 𝑥 2 − 𝑦 2 − 𝑥𝑦 + 120𝑥 + 100𝑦 − 500
4 8 4
b. Determine the approximate change in profit using a linear approximation

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Total differential

Application cont.

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Total differential

𝑦
1 1
Example. Consider 𝑧 = 4𝑥 2 . Find the approximate change in 𝑧 when 𝑥 changes from 𝑥 = to 𝑥 = and 𝑦 changes from
4 5
𝑦=1 to 𝑦 = 1.01.

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Total differential

Example cont.

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