September 2023 Prepared by Farrukh Ataev, ML for Math For Econ

Seminar 3 Multivariable functions

Continuity of 𝒛 = 𝒇(𝒙, 𝒚): A function f (x,y) is continuous at the point (𝑎, 𝑏) if and only if
1) 𝑓(𝑎, 𝑏) is defined ; 2) 𝑥→𝑎
lim 𝑓(𝑥, 𝑦) exists ; 3) 𝑥→𝑎
lim 𝑓(𝑥, 𝑦) = 𝑓(𝑎, 𝑏).
𝑦→𝑏 𝑦→𝑏

Rule of thumb: A graph of continuous two-variable function is a surface with no break-ups or holes.
Homogenous function: The function 𝑓(𝑥1 , 𝑥2 , … , 𝑥𝑛 ) is called homogeneous of degree 𝑑 if
𝑓(𝑡𝑥1 , 𝑡𝑥2 , … , 𝑡𝑥𝑛 ) = 𝑡 𝑑 𝑓(𝑥1 , 𝑥2 , … , 𝑥𝑛 )
Note: 𝑄(𝐾, 𝐿) = 𝐴𝐾 𝛼 𝐿𝛽 is homogeneous of degree 𝛼 + 𝛽: 𝑄(𝑡𝐾, 𝑡𝐿) = 𝐴(𝑡𝐾)𝛼 (𝑡𝐿)𝛽 = 𝐴𝑡 𝛼+𝛽 𝐾 𝛼 𝐿𝛽
If 𝛼 + 𝛽 < 1 (decreasing return to scale)
𝛼 + 𝛽 = 1 (constrant return to scale)
𝛼 + 𝛽 > 1 (increasing return to scale)
National income:
𝑌 = 𝐶 + 𝐼, 𝑌 = 𝐶 + 𝑆 (two sectors)
𝑌 = 𝐶 + 𝐼 + 𝐺 (three sectors)
𝑌 = 𝐶 + 𝐼 + 𝐺 + 𝑋 − 𝑀 (four sectors)
ISLM model:
𝑌 = 𝐶 + 𝐼 (𝐼𝑆 𝑠𝑐ℎ𝑒𝑑𝑢𝑙𝑒)
{
𝑀𝐷 = 𝑀𝑆 (𝐿𝑀 𝑠𝑐ℎ𝑒𝑑𝑢𝑙𝑒)

1) Plot the points in 3-D space and state which octant they are located in:
a) 𝐴(1,3,5) b) 𝐵(−2, −3,4) c) 𝐶(2,4, −1) d) 𝐷(0,0,4)
2) A long-distance truck driver is paid a soums per kilometer that he drives up to a distance of p
kilometers and b soums per kilometer for any additional distance beyond that. How much would the
driver be paid for a journey of q kilometers (where q > p)?
a) (𝑎 − 𝑏)𝑝 + 𝑞𝑏 b) 𝑎𝑝 − 𝑞𝑏 − 𝑝𝑏 c) (𝑎 + 𝑏)𝑞 + 𝑝𝑎 d) (𝑎 + 𝑏)(𝑞 − 𝑝).
3) A factory manufactures circular chips of radius 1cm. It uses rectangular strips of size 2cm by 100cm
to cut the circular chips from as shown in the figure below:
2
100
Find: a) the function of the waste W (x, y) if x strips are used and y chips were defective.
b) how much material is wasted if 10 strips were used and 23 chips were defective.
4) Find the function domain and range of the following functions and evaluate at (5,0):
a) 𝑧 = 𝑥 + √𝑦 b) 𝑧 = √1 − 𝑥 2 + √𝑦 2 − 1 c) 𝑧 = √𝑥 − 1 ⋅ 𝑒 𝑦 .
5) The demand function of a good is Q = 100 – P + 2Y + 0.5A, where Q, P, Y and A denote quantity
demanded, price, income and advertising expenditure respectively.
a) Find the demand when P = 10, Y = 40 and A = 6. Assuming that price and income are fixed, find
the additional advertising expenditure needed to raise demand to 179 units.
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September 2023 Prepared by Farrukh Ataev, ML for Math For Econ
b) If the advertising expenditure is raised by 12 units of money, how much will the total revenue rise?
c) Is this good inferior or superior?
6) A firm's production function is given by 𝑄 = 2𝐿𝐾 2 . Find:
a) the function domain and range.
b) the different combinations of labor and capital when 𝑄 = 32. Draw the isoquant.
c) less costly combination of inputs (𝐿, 𝐾) = (1,4) or (𝐿, 𝐾) = (4,2) to produce 32 units of product
if the firm’s input prices are given by $25 (wage rate for labor) and $15 (rental rate for capital).
d) the average product of labor (APL), the average product of capital and total factor productivity
when 𝐿 = 10 and 𝐾 = 5.
e) the degree of homogeneity and the type of returns to scale.
7) For a closed economy with no government intervention the consumption function is C  0.6Y  30
and planned investment is I = 100. Calculate the equilibrium level of:
a) national income; b) consumption; c) savings.
8) An open economy is in equilibrium when Y = C + I + G + X – M, where Y, C, I, X, and M are income,
consumption, investment, exports and imports respectively. Determine the equilibrium level of
income given that C = 0.8Y + 80, I = 70, G = 130, X = 100 and M = 0.2Y + 50.
9) Given that C = 0.8Y + 60, I = – 30r + 740, MS = 4000, L1 = 0.15Y, L2 = – 20r + 3825. Determine the
values of national income, Y, and interest rate, r, on the assumption that both the commodity and the
money markets are in equilibrium. (Hint: Use ISLM model)
Homework:
1) Plot the points in 3-D space and state which octant they are located in: 𝐴(0, −2,3), 𝐵(2, −3,1).
2) A box with rectangular base and rectangular sides is to be constructed. The bottom of the box is made
of a material that costs a soums per 1 cm2. The top of the box is made of a material that costs b soums
per 1 cm2. The side surface is made of a material that costs c soums per 1 cm2. If the dimensions of the
box are x cm, y cm and h cm, define:
a) the total surface function of the box;
b) the cost function of the box;
c) If the volume of the box is 1000 cm3 and each dimension must be at least 1 cm, find the total
surface function domain and range. (Hint: Among rectangles of the same perimeter, a square has
the largest area).
d) Find the cost function domain and range.
3) Calculate the limits:
𝑥−𝑦 3 𝑥 2 −4𝑦 2
a) lim (14 − 2𝑥 − 𝑦 2 ) b) lim c) lim √3 − 𝑥 2 − 𝑦 2 d) lim .
𝑥→5 𝑥→2 2𝑥+𝑦 𝑥→0 𝑥→2 𝑥−2𝑦
𝑦→3 𝑦→−4 𝑦→2 𝑦→1
4) Show the function domain and range of the following functions:
a) 𝑢 = √1 − 𝑥 2 − 𝑦 2 b) 𝑢 = ln(𝑥𝑦𝑧).
5) A firm produces 2 goods with the demand functions: Q1 = 5200 – 10P1 and Q2 = 8200 – 20P2. If the firm
has the total cost function TC  0.1Q12  0.1Q1Q2  0.2Q22  325 , find the profit function.
6) Are the functions homogeneous: a) 𝑓(𝑥, 𝑦) = 𝑥 + 5𝑥 2 𝑦 3 b) 𝑓(𝑥, 𝑦) = 2 ln 𝑥 + ln 𝑦?
7) Determine the degree of homogeneity and the type of returns to scale:
a) Q = 9K0.35L1.65; b) Q = 2K0.5L0.5R0.1; c) Q = A(bKα+(1–b)Lα)1/α.
8) The demand and supply functions for two interdependent commodity are given by
QD1  100  2 P1  P2 ; QS1  10  P1
QD2  5  2 P1  3P2 ; QS2  5  6 P2
where QDi , QSi and Pi denote quantity demanded, quantity supplied and price of good respectively.
Determine the equilibrium price and quantity for this two-commodity model.
9) Given the following simple model of national income determination:
C  £40  0.6YD ; T  0.2Y ; YD  Y  T ; Y  C  I G
a) Find the equilibrium national income if I = £80 and G = £120.
b) How the equilibrium income will change if Investment stays unchanged and Government expenditure
falls from £120 to £100?
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September 2023 Prepared by Farrukh Ataev, ML for Math For Econ
Answers for Seminar 2 problems:
Section Mathematics
1) a) 55. b) 0.2. c) 0.
2) 0. Slope of tangent line is 0.
3) a) not at x = 3 and 5. b) no c) false d) true e) 0 f) 1. g) undefined h) no.
4) x   ,1  1,  y ; x   1,1  y  . x   ,0 - concave, x  0, - convex.
5) a) 6x2 – 12x + 9. b) 2x^(-1/2) + 3/x2 – 14/x3. c) 3𝑥 2 𝑒 𝑥 + 𝑥 3 𝑒 𝑥 . d) (1 – x2)/(x2 + 1).
e) 96x3(2x4 + 5)2.
7) a) −2.5. b) 8x/(3y2).
Section Economics
1) a) 5,000. b) 5,000. c) 7,000. d) 15,000. e) 5,000. f) 7,000. g) does not exist. h) 15,000.
2) 𝑦1 (𝑥) − discontinuous, 𝑦2 (𝑥) − continuous.

Progressive system is fairer in terms of income redistribution, because it reduces income inequalities
and promotes social welfare by redistributing wealth from higher-income individuals to those with lower
incomes.
3) 𝑇𝐶 = 15 + 2𝑄 2 + 9𝑄. 𝐹𝐶 = 15. 𝑉𝐶 = 2𝑄 + 9. 𝑀𝐶 = 4𝑄 + 9.
4) TR = 100Q – 4Q2. MR = 100 – 8Q. ∆TR = 1.2.
6) 0.25.
7) MPL = 50 – 0.02L. a) MPL(1) = 49.98; b) MPL(10) = 49.8; c) MPL(100) = 48; d) MPL(1,000) = –150.