This preview shows page 1. Sign up to view the full content.
Unformatted text preview: ensions. Economic examples are
indifference curves, and isoquants. Variables vs. Parameters
Let’s see some more examples of functions.
What is similar, and what is different, between Ex.2, Ex.3, and Ex.4? They all contain constants,
while in Ex.3 and Ex.4 the constants a and c are unknown, so we call them parameters. It is
important to be able to distinguish parameters or constants from variables. The variables in the
above examples are x and z; we assume these variables can change. Parameters and constants we
take as given.
Economic examples of multivariate functions
Cobb-Douglas Utility function:
Cobb-Douglas Production function: ;
; Let’s focus on production, as utility is more of an abstract concept.
In Ex.5, output is produced by combining capital (K) and labour (L). What does this function
look like? If we fix output at a certain level, and graph all the different amounts of K and L that we can
combine to exactly attain the desired level of output, we have a...
View Full Document
This note was uploaded on 01/24/2013 for the course ECON 203 taught by Professor Okhan during the Spring '11 term at University of Victoria.
- Spring '11