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Input Requirement Set Analysis

This document contains instructions for problem set 3 of ECO 501. It includes 6 questions covering topics such as convexity of production sets and input requirement sets, properties of quadratic forms, and characteristics of quadratic equations. Question 1 contains 2 true/false statements to explain. Question 2 asks about properties of additive and divisible technologies. Question 3 evaluates convexity, regularity and monotonicity for 4 input requirement sets. Question 4 proves properties of quadratic forms. Question 5 asks about a concave function being a convex function of another variable. Question 6 examines characteristics of quadratic equations derived from quadratic forms.

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354 views1 page

Input Requirement Set Analysis

This document contains instructions for problem set 3 of ECO 501. It includes 6 questions covering topics such as convexity of production sets and input requirement sets, properties of quadratic forms, and characteristics of quadratic equations. Question 1 contains 2 true/false statements to explain. Question 2 asks about properties of additive and divisible technologies. Question 3 evaluates convexity, regularity and monotonicity for 4 input requirement sets. Question 4 proves properties of quadratic forms. Question 5 asks about a concave function being a convex function of another variable. Question 6 examines characteristics of quadratic equations derived from quadratic forms.

Uploaded by

hsalibha7290
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

ECO 501: Problem Set 3

(1) True or False? Don’t forget to explain your answers.


(a) If V (y) is a convex set, then the associated production set Y
must be convex.
(b) A differentiable function g(x) is s strictly increasing function if
and only if g0(x) > 0.

(2) Let Y be a production set. We say that the technology is additive if


y ∈ Y and y0 ∈ Y implies that y+y0 ∈ Y . We say that the technology
is divisible if y ∈ Y and 0 ≤ t ≤ 1 implies that ty ∈ Y .Show that if
a technology is both additive and divisible then Y must be a convex
and exhibit constant returns to scale.

(3) For each input requirement set determine if it is regular, monotonic,


and/or convex. Assume that the parmeters a and b and the output
levels are strictly positive.
(a) V (y) = {(x1 , x2 ) : x1 + min(x1 , x2 ) ≥ 3y}.
(b) V (y) = {(x1 , x2 ) : ax1 − (x1 , x2 )0.5 + bx2 ≥ y}.
(c) V (y) = {(x1 , x2 ) : ax1 + bx2 ≥ y}.
(d) V (y) = {(x1 , x2 ) : x1 (1 − y) ≥ a, x2 (1 − y) ≥ b}.

(4) Prove that a quadratic form on <n is concave if and only if it is


negative semidefinite. Prove that it is convex if and only if it is
positive semidefinite. What can be said about the more general
“quadratic function:” f (x) = xT Ax + b.x + c, where b and c are
suitable vectors. Also, xT is the transpose of x.
1
(5) For what concave function f is f a convex function?

(6) Given a quadratic form u0Du, where D is 2x2, the characteristic


d11 − r

d12
equation of D can be written as = 0, (d12 =
d21 d22 − r
d21 ). Expand the determinant; express the roots of this equation by
use of the quadratic formula; and deduce the following:
(a) No imaginary number can occur in r1 and r2 .  
c 0
(b) To have repeated roots, matrix D must be in the form of .
0 c
(c) To have either positive or negative semi-definiteness, the dis-
criminant of the quadratic form may vanish, that is |D| = 0 is
possible.

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