Lagrange Multipliers: Applications to Economics (UMAP)

This module introduces some of the applications of multivariable calculus to utility theory. The Lagrange multiplier is interpreted as the marginal rate of change of utility. Lagrange multiplier techniques are used to derive the set of Pareto optimal points in a trading situation. Students apply and interpret Lagrange multipliers.

Table of Contents:

1. INTRODUCTION

2. COST OF PRODUCTION

3. VECTORS

4. UTILITY

5. THE EDGEWORTH BOX

6. PROBLEMS

7. SAMPLE EXAM

8. SOLUTIONS