Re: Demand function

Posted by Asd1995 on Jun 14, 2017; 10:18am
URL: http://discussion-forum.276.s1.nabble.com/Demand-function-tp7605535p7605587.html

There is no contradiction. Your intuition worked and will work for every function that is quasi-concave or quasi-convex. Otherwise you'll run into problems. (here the function is quasi convex, which implies a border solution, if it was quasi concave it would imply a 'symmetric solution")

for clarity, consider

f(x,y)=xy
which has to be maximised given
x+y=10

answer is (5,5) (symmetric solution as function is quasi-concave)

f(x,y)= x + y
which has to be maximised given

xy=20

solution is (20,1) (extreme solution as function is quasi convex)