ECO102 Lecture Notes - Lecture 16: Simple Algebra, Directx, Stationary Point
Document Summary
The solution of the optimization problem provides an account of how the individual will behave in response to changing circumstances (e. g. , improvements in production technology, lower input prices, higher taxes, etc. ), that is, it enables us to do the comparative statics" relevant to individual behaviour. Equipped with these results about the individual, we can then analyze what happens in the aggregate, that is, nd the market equilibrium" by solving a system of equations. The point x d is a maximum point of f if f (x ) f (x), for all x d. Therefore, f (x ) is the maximum value of f . The point x is also called a maximizer of f . We call x a global maximum because there is no other point in the domain of the function assigned a number greater than f (x ).
