Introduction:

A special variety of equilibrium state is defined as the optimum position for a given economic unit(a household, a business firm or even an entire economy)and in which the said economic unit will be deliberately striving for attainment of that equilibrium.

Optimum Values and Extreme Values

Economics is usually a science of choice. When an economic project is to be carried out, such as the production of a specific level of output, there are normally a number of alternative ways of accomplishing it. One or more of these alternatives will, however, be more desirable than other from standpoint of some creation and it is essence of optimization problem to choose, on the basic off that specified criterion the best alternative available. The most common criterion of choice among alternatives in economics is the goals of maximizing something(such as maximizing a firms profits, a consumers utility or a rate of growth of a firm or of a countrys economy or of minimizing something (such as minimizing the cost of producing a given output).Economically we may categorize such maximization and minimization problem under the general heading of optimization meaning the quest for the best

This equation constitute the relevant objective function with as the objective of maximization and Q as the choice variable . The optimization probleme is then that of choosing the level of Q that maximizes .Note that while the optimal level of is by definition is maximal level, the optimal level of choice variable Q is itself not required to be either a maximum of a minimum. To cast the problem into more general mold for the farther discussion (though still confining ourselves to objective function of one variable let us consider the general function =(x) and attempt to develop a procedure for finding the level of x that will maximize or minimize the valu of y. It will be assumed in our discussion that the function is continuously differentiable .

Relative maximum and minimum : First derivative test

Since the objective function =(x) is stated in the general form ther is no restriction as to whether it linear or nonlinear or whether it is monotonic or contains both increasing and decreasing .

Relative versus Absolute Extreme

Figure 9.1

Figure 9.2

First Derivative Test:

Figure 9.3

Example 1

Second and Higher Derivatives

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Condition of Profit Maximization

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Second Derivative Test

Example 2

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Necessary versus Sufficient Condition

Maclaurin and Taylor Series

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Example 1

References: 1. Alpha C.Chiang & Kevin Wainwright(Fundamental Methods Of Mathematical Economics) 2. Class Lecture

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Contents:
Introduction Optimum values and Extreme values Relative Maximum and Minimum: First Derivative Test Second and Higher Derivatives Attitudes toward Risk Maclaurin and Taylor series

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Optimization: A Special Variety of Equilibrium Analysis Course Title: Introduction to Mathematics-B Course Code:122 Submitted TO MD:Mohiuddin Hossain Lecturer Dept.of Economics Submitted By Name Fahima siddiqua Farzana Habib Mozia Showkhin Most.Kamrun Nahar Naznin Naher Rawshan Aktar Md.Bodiul Islam Md.Salim Reza ID 1003013 1003024 1003030 1003007 1003025 1003047 1003003 1003055

Date of Submission: 07-12-2012

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