LONDON SCHOOL OF ECONOMICS

Professor Leonardo Felli

Department of Economics

S.478; x7525

EC400

2010/11
Math for Microeconomics
September Course, Part II
Problem Set 1

1. Show that the general quadratic form of

a11 x21 + a12 x1 x2 + a22 x22
can be written as ( x1 x2 )

a11 a12
0

a22

x1
x2

!
.

2. List all the principal minors of a general (3 3) matrix and denote which are the
three leading principal submatrices.

3. Let C =

0 0
0 c

!
, and determine the definiteness of C.

4. Determine the definiteness of the following symmetric matrices:

!
!
1 2 0

2 1
3 4

a)
b)
c)
2
4
5

1 1
4 6
0 5 6
5. Approximate ex at x = 0 with a Taylor polynomial of order three and four. Then
compute the values of these approximation at h = .2 and at h = 1 and compare with
the actual values.

LONDON SCHOOL OF ECONOMICS

Professor Leonardo Felli

Department of Economics

S.478; x7525

EC400

2010/11
Math for Microeconomics
September Course, Part II
Problem Set 2

1. For each of the following functions, find the critical points and classify these as local
max, local min, or cant tell:
a) x4 + x2 6xy + 3y 2 ,
b) x2 6xy + 2y 2 + 10x + 2y 5
c) xy 2 + x3 y xy
2. Let S Rn be an open set and f : S R be a twice differentiable function.
Suppose that Df (x ) = 0. State the weakest sufficient conditions the relevant points,
corresponding to the Hessian of f must, satisfy for:
(i) x to be a local max.
(ii) x to be a strict local min.
3. Which of the critical points found in Problem 1 are also global maxima or global
minima?
4. Check whether f (x, y) = x4 + x2 y 2 + y 4 3x 8y is concave or convex using its
Hessian.

LONDON SCHOOL OF ECONOMICS

Professor Leonardo Felli

Department of Economics

S.478; x7525

EC400

2010/11
Math for Microeconomics
September Course, Part II
Problem Set 3

1. A commonly used production or utility function is f (x, y) = xy. Check whether it

is concave or convex using its Hessian.
2. Prove that the sum of two concave functions is a concave function as well.
3. Let f be a function defined on a convex set U in Rn . Prove that the following
statements are equivalent:
(i) f is a quasiconcave function on U
(ii) For all x, y U and t [0, 1],
f (x) f (y) f (tx + (1 t)y) f (y)
(iii) For all x, y U and t [0, 1],
f (tx + (1 t)y) min{f (x), f (y)}

4. State the corresponding theorem for quasiconvex functions.

5. For each of the following functions on R1 , determine whether they are quasiconcave,
quasiconvex, both, or neither:
a) ex ; b) ln x; c) x3 x.

LONDON SCHOOL OF ECONOMICS

Professor Leonardo Felli

Department of Economics

S.478; x7525

EC400

2010/11
Math for Microeconomics
September Course, Part II
Problem Set 4

1. For the following program

min f (x) = x
x

subject to
(x2 ) 0,
find the optimal solution.
2. Solve the following problem:
max f (x1 , x2 ) = x21 x2
x1 ,x2

subject to
2x21 + x22 = 3.
3. Solve the following problem:
max x2 + y 2
x,y

subject to
ax + y = 1
when a [ 21 , 32 ].

4. Consider the following problem:

max f (x)
x

subject to
g(x) a
x X
Let X be a convex subset of Rn , f : X R a concave function, g : X Rm a convex
function, a is a vector in Rm . What is the Largrangian for this problem? prove it is
a concave function of the choice variable x on X.

LONDON SCHOOL OF ECONOMICS

Professor Leonardo Felli

Department of Economics

S.478; x7525

EC400

2010/11
Math for Microeconomics
September Course, Part II
Problem Set 5

1. Assume that the utility function of the consumer is

u(x, y) = x +

The consumer has a positive income I > 0 and faces positive prices px > 0, py > 0.
The consumer cannot buy negative amounts of any of the goods.
a) Use Kuhn-Tucker to solve the consumers problem.
b) Show how the optimal value of u ,depends on I.

2. Solve the following problem:

max(min{x, y} x2 y 2 )

LONDON SCHOOL OF ECONOMICS

Professor Leonardo Felli

Department of Economics

S.478; x7525

EC400

2010/11
Math for Microeconomics
September Course, Part II
Problem Set 6

1. Consider the problem of maximizing xyz subject to x + y + z 1, x 0, y 0

and z 0. Obviously, the three latter constraints do not bind, and we can then
concentrate only on the first constraint (x + y + z 1). Find the solution and the
Lagrange multiplier, and show how the optimal value would change if instead the
constraint is x + y + z .9.
2. Consider the problem of maximizing xy subject to x2 + ay 2 1. What happens to
the optimal value when we change a = 1 to a = 1.1?
3. Consider Problem 1 in Problem set 5. Set the first order conditions, and for the
case of an interior solution use comparative statics to find changes in the endogenous
variables when I and px change (one at a time), i.e., find
(i)
(ii)

x
,
I
x
,
px

y
,
I
y
,
px

q0
;
I
q0
.
px