Intuitive Mathematical Economics Series. Constrained Maximization and the Method of Lagrange Multipliers

Sergio Pernice

No 680, CEMA Working Papers: Serie Documentos de Trabajo. from Universidad del CEMA

Abstract: A fundamental assumption in most of economic modeling is that people maximize their utility subject to a budget constraint. This, as well as many other economic problems, math- ematically translate into problems of maximization with constraints. A powerful and widely used method to tackle some of these problems is the method of Lagrange multipliers. Yet, the exposition of such method in standard textbooks is rather formal and utilitarian. In this paper we try to present it emphasising the fundamental intuitions behind the method.

Keywords: Maximization with constraints; Lagrange multipliers. (search for similar items in EconPapers)
Pages: 17 pages
Date: 2018-12
New Economics Papers: this item is included in nep-hpe and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:cem:doctra:680

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