Unformatted text preview: what is the change in
separately. due to a small change in Hint: You will have to consider each “case” Case A: When
We know that
which means that we can calculate change in
applying the envelope theorem on:
[ due to a small change in a parameter by )
) ) Case B: Suppose
[ ) (d) Derive an equation for ( ) ( ) ( ) in terms of the parameters. What does this equation tell us about the parameter
Case A: When By the envelope theorem, we know this is: 7 University of Toronto, Department of Economics, ECO 204, 2013  20143 It tells us that as . For what value of is maximized? When: That is, with
when
unconstrained solution (i.e.
convince yourself of what’s going on here. from ). You should draw and Case B: Suppose By the envelope theorem, we know this is: It tells us that stays constant as . 8...
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This homework help was uploaded on 02/15/2014 for the course E 204 taught by Professor Ajaz during the Winter '13 term at University of Toronto.
 Winter '13
 AJAZ

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