Topic 6 - Optimization of Economic functions

Question 1

Stationary points

Answer 1

At a stationary point the slope = 0. As they are tangent to the graph.

Question 2

Local maximum

Answer 2

graph falls away on both sides.
If stationary point is at x = a
f”(a)<0

Question 3

Local minimum

Answer 3

Graph rises on both sides.
If stationary point is at x = a
f”(a)>0

Question 4

Stationary point of inflection

Answer 4

Graph rises on one side and falls on other.
If stationary point is at x = a
f”(a)=0. Point cant be classified as max or min.

Question 5

Optimization

Answer 5

The task of finding the maximum and minimum values. This helps when maximizing profits, costs, and utility