Assignment 2

Unit ETC2044 Page 1/??
Job Assignment 2 Date 01/06/2014

Name XXXXXX Due Date 2/06/2014
Student ID XXXXXX Tutor Wen Shi
1
S =
_
(1)
n
_
1 +
1
n
_
, n N
_
S = {2, 1.5, 1.
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
is an open set, all points in the set are equal to

their limits.
S is not an open set, because it is closed
S is a compact set, because it is closed and bounded
S is not a convex set because the line between -2 and 1.5 passes through the
point -0.25, and for S to containt the point -0.25, then n would not be an
integer, which is not in the set N
2 + 1.5
2
= 0.25 = (1)
n
_
1 +
1
n
_
0.25
(1)
n
= 1 +
1
n
0.25
(1)
n
1 =
1
n
n =
1
0.25
(1)
n
1
Which is encompassed by the following broader statement
n =
1
0.25 1
n =
3
4
or
5
4
Therefore n is not an integer, and thus the line between -2 and 1.5 does not containt
only points found in S, thus S is not a convex set.
2
2.1
< x
k
>=
k + 2
k
2
4
, k N
To show that < x
k
> converges to zero rst we must simplify the expression
We can say
k + 2
k
2
4
=
k + 2
(k + 2)(k 2)
=
1
k 2
Which has the values as follows
k: 1 2 3 4 5 6 7
x
k
: -1 1 0.5 0.
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
+ 2 which shows that < x

k
>0 is true
2.2
< x
k
>=
k + 2
k
2
3
, k N
To show that < x
k
> converges to zero rst we must do a bit of mental gymnastics,
rstly we must recognise the following
k + 2
k
2
3

k + 2
k
2
4
, k > 2 N
And we know the following
< y
k
>0 where < y
k
>=
k + 2
k
2
4
, k N
Additionally where the appropriate boundary condition is placed on k we can show
< x
k
> is never negative
k
2
3 0
k
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
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() =
and that < x

k
>0 is true.
2.4
< x
k
>= (1)
k
_
1 +
1
k
_
, k N
We can see that the sequence looks like
k: 1 2 3 4 5
x
k
: -2 1.5 1.
3 1.25 -1.2 (1)

k
(1 +
1
k
)
This does not look as though it is a convergent series, as the negatives and positives
appear to be trending to -1 and 1 respectively, which would make the sequence
divergent, to show this is the case Denition 1.15 shall be used in conjunction with
Theorem 1.11 which states
Given < x
k
>< x
k
> then < x
k
>x < x
k
>x Theorem 1.11
Looking at the subset comprised of only even indices
< x
k
>=< x
k
> mod (k, 2) = 0
We see
k: 2 4 6 8 10 (original indices used for convenience)
x
k
: 1.5 1.25 1.1
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

1
k

k
1
From this we can see that N

1
() =
1
and that < x

k
>1 is true.
So now well look at the subset comprised of only odd indices
< x
k
>=< x
k
> mod (k, 2) = 1
We see
k: 1 3 5 7 9 (original indices used for convenience)
x
k
: -2 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
From this we can see that N

2
() =
1
and that < x

k
>1 is true. So now we have
the following
< x
k
>1
And
< x
k
>1
Where
< x
k
>< x
k
> < x
k
>
Which clearly does not satisfy Theorem 1.11, therefore we can safely say that < x
k
>
is a non-convergent sequence.
3
f : D = [5, 5] R
is dened by
f(x) = x
2
3.1
In order to show that f is continuous at x
0
D Denition 2.3 must be used, which
states
A function
f : S R
n
R
is continuous at x
0
S if, for every > 0 there exists a > 0 such that
d(f(x), f(x
0
)) < if d(x, x
0
) <
If f is continuous at every point in S, we say that f is continuous on S, thus
|x
2
x
2
0
| < if |x x
0
| <
However we must acknowledge
|x
0
| < 5
With that in mind we can say
|x x
0
||x + x
0
| <
0 < |x x
0
| <
Let 1 which forces
0 < |x x
0
| < 1
|x + x
0
| < 2|x
0
| + 1
And now we can say
|x x
0
||x + x
0
| < |x x
0
|(2|x
0
| + 1) <
|x x
0
| =

2|x
0
| + 1
Therefore
= min
_
1,

2|x
0
| + 1
_
Proof
|x
2
x
2
0
| = |x + x
0
||x x
0
| < (2|x
0
| + 1)|x x
0
| <
(2|x
0
| + 1)
2|x
0
| + 1
=
Which shows that the limit exists for any x
0
dened by f on D, and hence, f(x) is
continuous on all of D
3.2
Let Denition 2.5
g : S R
n
R
We can say a function g is uniformly continous on S if, for every > 0, there exists
a > 0 such that for any x, y S
d(g(x), g(y)) < if d(x, y) <
Given this, and knowing what was shown in 3.2, we can say that f is uniformly
continous on D.
3.3
f is convex on D, this can be shown by a simple double dierentiation test
f(x
0
) = x
2
0
f
(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
)
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
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
_
=

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
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
4.4
Given
(x
1
, x
2
) S
=
_
(x
1
, x
2
) R
++
1
x
2
y
0
_
The set S
is convex if for any

(x
1
, x
2
), (y
1
, y
2
) 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
to be true the following must hold

z
1
z
2
y
0
Which can be rewritten as
y
0
(x
1
+ (1 y
1
))
(x
2
+ (1 y
2
))
And we can show the Geometric-Arithmetic mean inequality

0 (c d)
2
= c
2
2cd + d
2
c = d
= c
2
+ 2cd + d
2
4cd
= (c + d)
2
4cd
(c + d)
2
4xy
c + d 2
cd
c + d
2

cd
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
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
. This in turn satises the

requirement for a minimum value, which provides the required restrictions to ensure
an optimum solution.
5.2.2
The lagrangean function is dened as
L(x
1
, x
2
, y, ) = p(x
1
, x
2
) + g(x
1
, x
2
, y)
= w
1
x
1
+ w
2
x
2
+
_
x
1/2
1
x
1/4
2
y
_
5.3
The rst order conditions of this problem are
L
x
1
=
L
x
1
= w
1
+

4
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

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Unit ETC2044 Page 1/??

Job Assignment 2 Date 01/06/2014

is an open set, all points in the set are equal to

+ 2 which shows that < x

and that < x

3 1.25 -1.2 (1)

From this we can see that N

and that < x

From this we can see that N

and that < x

is convex if for any

to be true the following must hold

And we can show the Geometric-Arithmetic mean inequality

. This in turn satises the

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