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3, 1.25, 1.2 }
Max(S) = 1.5
Sup(S) does not exist, as N has a closed upper bound.
Min(S) = -2
Inf(S) does not exist as N has a closed lower bound.
Set of interior points of S does not exist as N is not dense
Set of boundary points of S is S as S is not a dense set
S is a closed set, because S
3 0.25 0.2
1
k2
It appears obvious that the sequence if it converges will converge to 0, so using the
denition and ensuring to start at values greater than 2, due to the sign shift and
possible innities we get
|x
k
0|
Therefore, the sequence converges to 0 if and only if we can nd a N() such that,
for any k N()
|x
k
0| =
1
k 2
1
k 2
1
k 2
, k > 2
k 2
1
k
1
+ 2
And from this we can clearly see N() =
1
3
k 2
So Given (< y
k
>0) (< x
k
>< y
k
>) (< x
k
> 0) k > 2, we can safely say
< x
k
>0 is true due to Sandwich Theorem.
2.3
< x
k
>=
_
1
k
,
1
k
_
, k N
show that < x
k
>0
We can see that the sequence looks like
k: 1 2 3 4 5
x
k1
: 1 0.5 0.
3 0.25 0.2
1
k
x
k2
: 1 0.5 0.
3 0.25 0.2
1
k
Because this is a two dimensional sequence we will need to update our distance
metric
Using the Euclidian distance metric Denition 1.14
d(x, y) = ||x y||
Which can be expanded to two dimensions
d(a, b) =
_
(a
x
b
x
)
2
+ (a
y
b
y
)
2
We can now show that < x
k
> 0 is true, if and only if we can nd a N() such
that for any k N() by rewriting < x
k
> as
_
1
k
,
1
k
_
From which we can use
d(x
k
, x) k N() Denition 1.15
Unit ETC2044 Page 4/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
To say
_
1
k
0
_
2
+
_
1
k
0
_
2
_
1
k
2
+
1
k
2
2
k
k
From this we can see that N() =
6 1.125 1.1 (1 +
1
k
)
Which we can then see converges to 1 using Denition 1.15
d( x
k
, x) k N
1
() Denition 1.15
| x
k
1|
1 +
1
k
1
1
k
Unit ETC2044 Page 5/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
1
k
k
1
3 1.2 1.142857 1.
1 (1 +
1
k
)
Which we can then see converges to -1 using Denition 1.15
d( x
k
, x) k N
2
() Denition 1.15
| x
k
+ 1|
1
1
k
+ 1
1
k
1
k
k
1
(x
0
) = 2x
0
f
(x
0
) = 2
Given f
(x) > 0 the turning point is a minimum, which dictates that f(x) is convex
on all of D
4
A rms production function can be described as follows
y = f(x
1
, x
2
) = x
1
x
2
, R
++
4.1
The homogeneity of this function can be found Denition 3.7
f(x
1
, x
2
) = (x
1
)
(x
2
)
= (x
1
)
(x
2
)
= (x
1
x
2
)
= f(x
1
, x
2
)
Unit ETC2044 Page 8/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
Therefore the degree of homogeneity of the rms production function is
4.2
S =
_
(x
1
, x
2
) R
++
1
x
2
= y
0
_
4.2.1
Given
x
1
x
2
= y
0
Find
dx
2
dx
1
using implicit dierentiation
d
dx
1
_
x
1
x
2
_
=
d
dx
1
_
y
0
_
= 0
=
d
dx
1
_
x
1
_
x
2
+
d
dx
1
_
x
2
_
x
1
Product Rule = x
2
x
1
1
+ x
1
x
1
2
d
dx
1
_
x
2
_
dx
2
dx
1
=
x
2
x
1
1
x
1
x
1
2
dx
2
dx
1
=
x
2
x
1
4.2.2
Given
dx
2
dx
1
=
x
2
x
1
= 0
Find
d
2
x
2
dx
2
1
using implicit dierentiation
d
2
x
2
dx
2
1
=
d
dx
1
_
x
2
x
1
_
= 0
=
d
dx
1
_
x
2
__
x
1
_
d
dx
1
_
x
1
__
x
2
_
(x
1
)
2
=
_
x
1
_
d
dx
1
_
x
2
_
+ x
2
(x
1
)
2
Unit ETC2044 Page 9/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
x
2
= x
1
d
dx
1
_
x
2
_
d
2
x
2
dx
2
1
=
x
2
x
1
4.2.3
The curvature of the isoquant is convex, as the second derivative is positive, The rst
derivative is always negative, initially quite large, and then signicantly reducing,
this indicates that the shape of the isoquant is something hyperbolic in nature.
4.3
4.3.1
Hessian Matrix
_
F
11
F
12
F
21
F
22
_
Where
F
11
=
2
f
x
2
1
F
12
=
2
f
x
1
x
2
F
21
=
2
f
x
2
x
1
F
22
=
2
f
x
2
2
Calculating F
nm
F
11
=
2
f
x
2
1
=
x
1
x
1
_
x
1
x
2
_
=
x
1
_
x
2
x
1
1
_
= ( 1)x
2
x
2
1
F
12
=
2
f
x
1
x
2
=
x
1
x
2
_
x
1
x
2
_
Unit ETC2044 Page 10/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
=
x
1
_
x
1
x
1
2
_
= x
1
1
x
1
2
F
21
=
2
f
x
2
x
1
=
x
2
x
1
_
x
1
x
2
_
=
x
2
_
x
2
x
1
1
_
= x
1
1
x
1
2
F
22
=
2
f
x
2
2
=
x
2
x
2
_
x
1
x
2
_
=
x
2
_
x
1
x
1
2
_
= ( 1)x
1
x
2
2
Therefore the Hessian Matrix is
_
( 1)x
2
x
2
1
x
1
1
x
1
2
x
1
1
x
1
2
( 1)x
1
x
2
2
_
4.3.2
Given the Hessian Matrix is
_
( 1)x
2
x
2
1
x
1
1
x
1
2
x
1
1
x
1
2
( 1)x
1
x
2
2
_
We can force the function to be strictly concave for values of and that satisfy
the following
|F
11
| < 0
and Theorem 4.10
Unit ETC2044 Page 11/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
F
11
F
12
F
21
F
22
> 0
Beggining with F
11
F
11
= ( 1)x
2
x
2
1
( 1)x
2
x
2
1
< 0
( 1)x
2
x
2
1
< 0
1 < 0
< 1
And secondly
F
11
F
12
F
21
F
22
= (F
11
)(F
22
) (F
12
)(F
21
)
0 <
_
( 1)x
2
x
2
1
__
( 1)x
1
x
2
2
_
_
x
1
1
x
1
2
_
2
0 <
2
x
1
2
x
2
2
x
1
2
x
2
2
+
2
x
1
2
x
2
2
x
1
2
x
2
2
0 <
x
2
1
x
2
2
( + 1)
x
2
1
x
2
2
0 < , x
22
1
x
22
2
( + 1)
Which can be simplied further to
( + 1) < 0
+ < 1
< 1
and from this we can clearly state that
_
, R
++
0 < + < 1
_
In order to ensure that the function is strictly concave
Unit ETC2044 Page 12/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
4.4
Given
(x
1
, x
2
) S
=
_
(x
1
, x
2
) R
++
1
x
2
y
0
_
The set S
the point
z = x + (1 t) y S
[0, 1]
Where
x = (x
1
, x
2
) and y = (y
1
, y
2
)
So letting
x, y S
and [0, 1]
We can look back at z
z = x + (1 ) y S
[0, 1]
Which we can rewrite as
z
1
= x
1
+ (1 y
1
)
z
2
= x
2
+ (1 y
2
)
For z S
1
z
2
y
0
Which can be rewritten as
y
0
(x
1
+ (1 y
1
))
(x
2
+ (1 y
2
))
cd
c + d
2
cd
Unit ETC2044 Page 13/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
Which we can make more relevant by recognising that 0 < < 1 and applied to the
problem in order to state
x + (1 ) y x
y
(1)
Which can be applied now to show
y
0
_
x
_
y
1
_
(x
1
+ (1 y
1
))
(x
2
+ (1 y
2
))
Which demonstrates
(z
1
, z
2
) S
=
_
(z
1
, z
2
) R
++
1
z
2
y
0
_
Where
z = x + (1 t) y S
[0, 1]
Which shows that the upper contour set S
is convex.
5
Production function f of factors x
1
and x
2
is
y = f(x
1
, x
2
) = x
1/2
1
x
1/4
Exogenously given factor prices create total cost of production, TC
TC = w
1
x
1
+ w
2
x
2
| w
1
, w
2
R
++
Resulting in an optimisation problem of
min
x
1
,x
2
(w
1
x
1
+ w
2
x
2
)
subject to
(x
1
, x
2
) S
=
_
(x
1
, x
2
) R
++
x
1/2
1
x
1/4
2
y
_
5.1
5.1.1
TC = w
1
x
1
+ w
2
x
2
| w
1
, w
2
, x
1
, x
2
R
++
(x
1
, x
2
) S
=
_
(x
1
, x
2
) R
++
x
1/2
1
x
1/4
2
y
_
Theorem 2.9/4.1 (Wierstrass Theorem) States that if
f : D R
n
R
Unit ETC2044 Page 14/??
Job Assignment 2 Date 01/06/2014
Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
is continous on D, and D is a compact set, then f attains a global maximum and a
global minimum on D. However the Wierstrass theorem does not state satisfying it
is a requirement. However we are only looking for a global minimum, which exists if
the following is true.
f(x
0
) f(x) x D
5.1.2
Under the assumption that the correction missed altering this question to refer to
equation 5 instead of 4, Ill proceed to answer whether 5 satises the condition.
Unfortunately the equation TC = w
1
x
1
+ w
2
x
2
is on an open domain, which does
not satisfy the Wierstrass Theorem, however it does appear that it may satisfy the
second condition, if sucient restrictions are placed on x
1
and x
2
.
5.1.3
The statement (x
1
, x
2
) S
=
_
(x
1
, x
2
) R
++
x
1/2
1
x
1/4
2
y
_
also does not satisfy
the Weirstrass Theorem, however it does appear that it will satisfy the second condi-
tion, by applying a strict equality to replace the inequality, this will provide a lower
bound, which may be enough to satisfy the second condition.
5.2
S
=
_
(x
1
, x
2
) R
++
x
1/2
1
x
1/4
2
= y
_
5.2.1
The contraint qualication is satised for this problem, as we are able to create a
constraint function using the partially bounded set S
x
2
2
x
1
L
x
2
=
L
x
2
= w
2
+
x
1
4
4
_
x
3
2
L
y
=
L
y
=
L
=
L
x
1
4
x
2
y
5.4