One of the most important functions we will encounter in this book is the Cobb-Douglas function:...
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One of the most important functions we will encounter in this book is the Cobb-Douglas function: y = (x,)"(x,)", where a and ß are positive constants that are each less than 1. a. Show that this function is quasi-concave using a "brute force" method by applying Equation 2.100. b. Show that the Cobb-Douglas function is quasi-concave by showing that any contour line of the form y = c (where c is any positive constant) is convex and there- fore that the set of points for which y > c is a convex set. c. Show that if a + B > 1, then the Cobb-Douglas func- tion is not concave (thereby illustrating again that not all quasi-concave functions are concave). One of the most important functions we will encounter in this book is the Cobb-Douglas function: y = (x,)"(x,)", where a and ß are positive constants that are each less than 1. a. Show that this function is quasi-concave using a "brute force" method by applying Equation 2.100. b. Show that the Cobb-Douglas function is quasi-concave by showing that any contour line of the form y = c (where c is any positive constant) is convex and there- fore that the set of points for which y > c is a convex set. c. Show that if a + B > 1, then the Cobb-Douglas func- tion is not concave (thereby illustrating again that not all quasi-concave functions are concave).
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Managerial economics applications strategy and tactics
ISBN: 978-1439079232
12th Edition
Authors: James r. mcguigan, R. Charles Moyer, frederick h. deb harris
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